Renminbi qualified foreign institutional investors (RQFII) pilot scheme expanded

The pilot scheme for RQFII was first introduced in China in December 2011, with the aim of enabling China’s financial industry to channel overseas RMB funds into the domestic market through various RMB denominated products launched in Hong Kong (such as bond-type funds and ETFs) in furtherance of the promotion of RMB internationalisation.

In March 2013, the China Securities Regulatory Commission (CSRC) revised its RQFII rules to expand the pilot scheme in response to the continued expansion of the offshore RMB markets and an increasing demand for repatriation of offshore RMB back to the onshore securities market.

The RQFII pilot scheme was originally limited to Hong Kong subsidiaries of PRC incorporated fund management companies and securities companies which have obtained a type 9 licence from the Hong Kong regulator. As a result of the recent expansion, Hong Kong subsidiaries of PRC incorporated commercial banks or insurance companies and other financial institutions which are registered and domiciled in Hong Kong (without a PRC background), if they are a type 9 licence holder, can also apply for a RQFII licence from CSRC. RQFIIs may invest in a broad range of RMB equity and debt instruments traded on a Mainland stock exchange or the National Interbank Bond Market and can trade stock index futures to hedge its holding of A shares.

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