The China Securities Regulatory Commission (CSRC) has issued rules to allow mainland fund management companies to set up branches and representative offices in Hong Kong, a move followed by the CSRC’s approval in June last year to give mainland fund managers access to Hong Kong stocks.

The rules were issued to promote cooperation in the area of asset management, according to Xinhua News Agency. Keith Robinson, partner at Dechert LLP, said one of the government’s intentions is to deepen Chinese asset managers’ knowledge and to enhance the professionalism and sophistication of the domestic asset management industry.

“There is potential for Hong Kong management firms to learn more about the mainland domestic market or for the mainland to learn more about the global market,” he said.

The rules mentioned that applicants “should research carefully Hong Kong’s regulatory and legal environment and requirements, and give ample reflection on their own financial strength and management capabilities.”

However, risks always exist in outbound investment, Robinson said. “Anytime you go into a new geographical location with different regulators and regulations that you may not be familiar with, you are always at risk of doing something that is against the new regulations.”

Though the slump in global stock markets may have an impact on the scheme, Robinson is optimistic about the market. He said that uncertainty does exist, but that the market will turn around eventually.

“The regulators are clearly getting people a green light to come over to Hong Kong. I think it’s doing so for a reason. They are definitely ready for this effort. I suspect that’s fairly significant motivating force in this authorization.”

Hong Kong, he added, is certainly an important stepping stone for people who are looking to invest in the mainland.