RQFII quota allocated to mainland fund houses

Updated: 2011-09-08 07:44

By Li Tao (HK Edition)

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The Hong Kong subsidiaries of mainland fund houses and securities firms will be allocated the initial quota of the yuan qualified foreign institutional investor (RQFII) program, the People's Bank of China (PBoC) told China Daily in an email statement on Wednesday.

RQFII was unveiled by Vice-Premier Li Keqiang when he visited the city last month.

Candidates for the initial quota will be firms that have a sound knowledge of the mainland market, according to the central bank.

Eighty percent of the total designated 20 billion yuan-funded ($3.1 billion) foreign investment will go into mainland bond markets in the initial stage, the bank said, adding that all the preparatory work has essentially been completed and the pilot scheme is likely to be launched soon.

PBoC said it will also continue to expand the size of Hong Kong's yuan bonds market by allowing more qualified domestic financial institutions as well as mainland enterprises to issue so-called "dim sum" bonds in the city.

Under the current plan, mainland entities will be allowed to raise a total of 50 billion yuan in the yuan-denominated bond market in Hong Kong this year.

The share will be split evenly between mainland financial and non-financial institutions with a quota of 25 billion yuan each, the PBoC said.

As bond-issuance is a stable fundraising channel compared with deposits and interbank borrowing, the central bank said it will continue to support Hong Kong-funded banks on the mainland to issue yuan bonds in the city, in a bid to promote diversification of fundraisings and improve the liability structure of such banks.

Since 2009, the central government has launched a series of measures to boost the role of the yuan in cross-border trade and investment, with the result that it has helped broaden the channels both for funding-raising and the use of the yuan in Hong Kong.

According to agreements between the PBoC and Hong Kong Monetary Authority, the mainland only supervises cross-border yuan funds while Hong Kong is independent in developing its own yuan business in accordance with its own regulatory requirements and market demands.

"The development of the offshore yuan business in Hong Kong is not the result of mainland administrative pushes, but the choice of the market," the PBoC said in the statement.

litao@chinadailyhk.com

China Daily

(HK Edition 09/08/2011 page2)