The People’s Republic of China (PRC) announced the expansion of the Renminbi Qualified Foreign Institutional Investor (RQFII) program to include Australia. Australian investors will now be able to invest up to 50 billion yuan (RMB) ($A9.28 billion approx.) An agreement to allow RMB trades to be cleared in Australia was also announced. These developments follow the July launch of an RMB settlement service in Sydney allowing Australian companies to use RMB as a settlement currency in cross-border transactions using the Australian Stock Exchange Austraclear infrastructure.
What is the RQFII program?
The RQFII program, which was launched in December 2011, allows non-PRC institutional investors from approved jurisdictions (Relevant Jurisdictions) to invest, using offshore RMB, in certain onshore-PRC financial instruments, including securities listed on PRC stock exchanges. Hong Kong was the first Relevant Jurisdiction, followed in October 2013 by London. Prior to the addition of Australia, the RQFII program had grown to include: Hong Kong; London; Singapore (October 2013); France (March 2014); South Korea (July 2014); and Germany (July 2014), with total investment hitting RMB 640 billion. Additionally, China has agreed to let Taiwan participate in the RQFII, however implementation is subject to reaching a prior trade agreement.
Hong Kong has the largest RQFII quota of RMB 270 billion, followed by the UK, France, Germany and South Korea with RMB 80 billion each and Singapore with RMB 50 billion. Taiwan has an anticipated quote of RMB 100 billion. The RQFII program aims at widening investment channels for overseas funds on the Chinese mainland and the inclusion of Australia in the RQFII scheme is a further step towards the internationalisation of the RMB.
As the PRC seeks to further internationalise the RMB, there are expanding opportunities for international investors (now including Australian investors) to obtain exposure to onshore PRC markets and assets.
Participation in the RQFII program is open to financial institutions with a principal place of business in a Relevant Jurisdiction that:
- have obtained an asset management licence (with the relevant authorisations) issued by a regulator in the Relevant Jurisdiction, and
operate an asset management business.
Assuming Australian applicants meet this requirement, the RQFII application process involves an application to the China Securities Regulatory Commission for an RQFII licence and then to the State Administration of Foreign Exchange for an investment quota. In terms of timing, each regulator has 60 days from receipt of a complete application to approve or reject the application.
For more information about the RQFII program please contact Lynn Yang (Shanghai), John Moutsopoulos (Sydney), Charlotte Robins (Hong Kong), Jonathon Herbst (London) or your usual Norton Rose Fulbright contact.