China throws open RQFII to all finance firms in Hong Kong

Chinese flagChina has relaxed the rules on its RQFII scheme to allow “essentially any foreign financial firm domiciled in Hong Kong” to participate, says a Shanghai-based analyst.

The law changes posted to the China Securities Regulatory Commission website surprised Z-Ben Advisors, a research and consulting firm, which expected the rule change to open the scheme only to Hong Kong subsidiaries of mainland banks and insurance companies.

The RQFII, or renminbi qualified foreign institutional investor, scheme allows licensed foreign investors to put offshore renminbi holdings into mainland China capital markets.

The changes also remove restrictions that required RQFII products either to have a minimum 80% of their assets invested in fixed income or be structured as exchange-traded funds.

The Chinese announcement is not yet available on the English-language version of the commission's website.

So far, only Hong Kong subsidiaries of Chinese fund management companies and brokerages have been eligible for the scheme. Z-Ben Advisors says 25 companies had RQFII licences by the end of February, and together they shared a quota of 70 billion renminbi (€8.7 billion).

Z-Ben Advisors predicts at least 20 foreign financial firms in Hong Kong will apply for RQFII licences in the coming months now the rules have been relaxed.

“Among these, there will certainly be a number of big-name global firms itching to finally catch up with the domestic managers’ success in recent China-fund launches, the popular directly-investing RQFII ETFs being a particularly attractive wave they will be eager to ride,” says Z-Ben Advisors.

©2013 funds europe