The Chinese regulator has granted London-based emerging market specialist Ashmore a licence to raise offshore renminbi and invest them into the Chinese onshore equity and fixed income market.
Through the renminbi qualified foreign institutional investor (RQFII) scheme, asset managers can use the Chinese currency held offshore to invest in the mainland. In contrast, through the widely used qualified foreign institutional investor (QFII) scheme China investments are made in a foreign currency.
In London, the RQFII scheme facilitates the investment of the growing pools of offshore renminbi held by large corporates and retail investors in the onshore Chinese securities markets.
An RQFII account allows investors to also make investments in other currencies because offshore renminbi are freely convertible.
Jan Dehn, head of research at Ashmore, says China has been one of the most compelling, yet difficult markets for investors to access.
Dehn says the scale of the investment opportunity in China is “enormous”, with an interbank bond market of $4 trillion (€2.9 trillion) and an A-shares market capitalisation of over $3.5 trillion.
“Both these markets have traditionally been difficult for international investors to access until now,” he adds.
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