Pilot Announced For HK-China Equity Investment Scheme
Thursday, December 22, 2011

Hong Kong’s Securities and Futures Commission (SFC) has welcomed the pilot scheme, jointly announced recently by the China Securities Regulatory Commission (CSRC), People’s Bank of China and State Administration of Foreign Exchange, to allow qualified Hong Kong fund managers and investment companies to invest offshore renminbi (RMB) funds in China's securities markets.

SFC’s Chairman, Dr Eddy Fong, said that the “announcement not only marks another major milestone in the process of transforming RMB into an internationally accepted and widely used currency, but also confirms the strategic significance of Hong Kong as a testing ground for Mainland (Chinese) financial reforms”.

Allowing investment in the Chinese equity market by means of the RMB Qualified Foreign Institutional Investor (RQFII) scheme was part of the policies and measures China’s Vice Premier Li Keqiang set out, in August this year, to expand the cross-boundary use of the RMB.

Hong Kong’s government had been expressing a desire for an early announcement of RQFII’s technical arrangements from the CSRC. It is considered that the existing regulatory system administered by the SFC is capable of handling a wide range of investment products eventually to be offered for sale to the public under the RQFII scheme.

According to its guidelines, the pilot project, which provides for an initially-low RMB20bn (USD3.15bn) investment cap, will begin with Hong Kong-based subsidiaries of Chinese fund managers and securities firms. At least 80% of the RQFII funds are be invested in Chinese fixed-income products, with no more than 20% being placed into equities.

Those financial firms which intend to launch RQFII products will need to apply to relevant Chinese authorities for approval of their eligibility and investment quota.

It is confirmed that the SFC will liaise closely with its Chinese regulatory counterparts and authorities to implement this scheme. “As an international financial centre, Hong Kong can offer ample experience for the gradual opening of the Mainland financial markets,” Fong added. “We will further strengthen our partnership with the Mainland in pursuit of this common interest.”