China has given a US$5 billion qualified domestic limited partnership, or QDLP, quota to Hainan, seven months after designating the southern province as a new pilot zone for the scheme.
The QDLP is a nine-year old programme that allows foreign asset managers to raise funds from Chinese investors for investing in traditional and alternative assets overseas.
Beijing aims to develop Hainan as a free trade port by 2025. The QDLP designation will help the province achieve this target, the State Administration of Foreign Exchange, which supervises China’s foreign reserves and grants the quotas, says in a statement on April 13.
The agency says its office in Hainan has begun preparatory work for the QDLP scheme but didn’t say when it will go live.
Including Hainan, Beijing has expanded the QDLP programme to eight cities and provinces since introducing it in 2012. Last December, it doubled the quota for Shanghai to $10 billion because of growing demand for outbound investments.
“The QDLP programme, as a whole, has been successful over the years in terms of capital growth and participation,” Melody Yang, a partner with UK legal firm Simmons & Simmons, tells Asia Asset Management.
The minimum registered capital requirement for the scheme in Hainan is $750,000, far lower than the $2 million set for Shanghai. According to Yang, this may lure more foreign managers to establish QDLP business in Hainan.