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Executive Summary: Navigating the Dual Regulatory Paradigms of AI and Finance in Greater China

As artificial intelligence (AI) fundamentally reshapes the financial landscape, a sharp regulatory divergence has emerged between Mainland China and Hong Kong SAR. While Mainland China enforces a centralized, security-driven mandate, Hong Kong has adopted a principles-based, risk-mitigation framework. This post explores how financial institutions must navigate this bifurcated landscape, balancing the drive for innovation against increasingly distinct compliance requirements.

1. Mainland China: State Control and Mandatory Disclosure: The Mainland’s regulatory approach is characterized by top-down control and national security priorities.

• Mandatory Filing: Under the Guiding Opinions on Regulating the Asset Management Business (Yinfa No. 106), financial institutions using AI for intelligent investment advisors must file the main parameters of their AI models and asset allocation logic with regulators, prioritizing transparency to the state over proprietary secrecy.
• Government Integration: New guidelines for AI in government affairs push for "intensive" and "scenario-driven" deployment to boost efficiency, while strictly enforcing confidentiality requirements to prevent state secrets from entering non-classified Large Models.
• Financial Stability: This strict oversight builds upon a foundation of risk prevention established in 2020, where regulators prioritized stabilizing the macro leverage ratio and dismantling implicit payment guarantees in asset management.

2. Hong Kong SAR: Ethical Governance and Consumer Protection: In contrast, Hong Kong regulators focus on institutional conduct, ethics, and consumer outcomes.

• Data Protection Framework: The Privacy Commissioner (PCPD) has released the Model Personal Data Protection Framework for AI, emphasizing accountability and ethical data stewardship. This includes specific checklists for employee use of Generative AI (GenAI) to mitigate privacy risks.
• Human-in-the-Loop: The Hong Kong Monetary Authority (HKMA) mandates a "human-in-the-loop" approach for customer-facing GenAI. Banks must ensure models do not hallucinate or discriminate, providing customers with "opt-out" mechanisms for AI-driven decisions.
• Targeted Risk Mitigation: The Securities and Futures Commission (SFC) has issued circulars specifically addressing the risks of large language models in investment advisory, focusing on internal controls, data quality, and cybersecurity rather than algorithmic filing.

Conclusion for Industry LeadersMultinational enterprises operating across the Greater Bay Area face a complex compliance reality. They must establish a bifurcated governance structure: one track dedicated to rigorous technical disclosure and security filing for Mainland operations, and a parallel track focused on ethical governance, fairness testing, and human oversight for Hong Kong. Success in 2025 and beyond will depend on the ability to harmonize these dual obligations without stifling technological innovation.

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