Chinese regulators plan to test RQFII schemes in London, Singapore
15 July 2013
News, Asia, China, Global
By Hui Ching-hoo
The China Securities Regulatory Commission (CSRC), the People’s Bank of China (PBoC) and the State Administration of Foreign Exchange (Safe) have announced joint plans to expand the RMB Qualified Financial Institutional Investor (RQFII) pilot programme to Singapore and London, according to the official Xinhua News Agency.
A CSRC spokesman noted that regulators have already made significant progress in facilitating the RQFII scheme, with the removal of investment restrictions on Mainland onshore bonds and equities and the linking in of Taiwanese investors. Furthering developments, the authorities are now looking at additional offshore RMB centres to expand the programme, including Singapore and London, where initiatives will utilise the model as rolled out in Taiwan.
Market practitioners have applauded the continued advancement of the RQFII programme, saying it will help to broaden the scheme’s distribution channel and product variety.
Thomas Kwan, executive director and head of fixed income at Harvest Global Investments, told Asia Asset Management in an earlier interview that the continuing expansion of the RQFII and QFII schemes is an inevitable trend given the increasing convertibility of the RMB. This, together with the growing capacity of the QDII scheme, will facilitate two-way RMB flows across borders, paving the way for full RMB internationalisation.
Mr. Kwan expects the RQFII scheme to further open up to non-Chinese managers in the longer term. However, he plays down the challenge from overseas players to the domestic industry, noting that Mainland fund managers still have the advantage given their insight regarding the Chinese market.
Separately, the CSRC spokesman stated that authorities will further raise the total QFII quota size to US$150 billion in an attempt to buoy foreign investments into China. The directive comes after the Chinese government increased the quota from $30 billion to $80 billion in April 2012.
The CSRC has awarded QFII licenses to 22 foreign institutions to date this year, taking the total number of QFII institutions to 229. Meanwhile, the Safe has granted $6 billion in QFII quotas, boosting the total quota to $43.46 billion.
Currently, the combined QFII and RQFII investment accounts for approximately 1.6% of the A-share market valuation.
The RQFII programme was first introduced in December 2011 to allow RQFII-recognised institutions the capacity to channel RMB funds raised in Hong Kong into the Mainland capital markets.
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