QFLP scheme: IDG Capital, Brookfield among 7 firms granted access by Shanghai to unlisted firms
- Shanghai ‘determined to conduct innovations in the finance sector at Lingang’, local financial regulator says
- Other newly approved QFLPs include Vitalbridge, Cathay Capital, Kasikornbank, Ausvic Capital and CM Venture Capital
A signing ceremony was held on the sidelines of the Lujiazui Forum, the mainland’s most influential financial conference, which normally draws China’s top financial and securities regulators, as well as top bankers and financiers. These seven institutions will conduct investment and fundraising activity in the city’s Lingang free-trade zone, a 120 sq km coastal area linked to the Yangshan Port by the Donghai Bridge.
Beijing launched the QFLP scheme on a trial basis in 2011 with big-name asset managers such as Blackstone among the first batch of qualified investors in Shanghai. Seen as a bold step taken by China’s financial regulators towards making the yuan fully convertible under capital accounts, the scheme continues to be run on a trial basis.
Bay area special zones to speed up tax, legal incentives for offshore funds
Under the scheme, foreign investors are able to combine capital they raise abroad with cash in yuan committed by mainland investors, creating the scope for giant funds to explore the potential of China’s high-growth companies. Moreover, while QFLP funds can invest in Chinese companies directly without regulatory approval, other foreign investors will have to obtain these approvals before investing in such firms.
QFLP and QFII investors are granted an investment quota for equities of mainland firms. The bureau did not on Thursday disclose the quotas granted to the seven institutions. QFII or the qualified foreign institutional investor scheme was created by Beijing in 2002 to allow select overseas institutions to buy yuan-denominated A shares in the mainland’s stock markets.
Overseas institutions and individuals can trade yuan-denominated A shares through Hong Kong’s Stock Connection mechanism, but the mainland equity market is otherwise basically off-limits to foreign capital.
Since the launch of QFLP, a total of 90 foreign institutions have received approvals to buy shares in unlisted companies, with their total investment amounting to 50 billion yuan (US$7 billion) over the past 12 years.
Asset managers Azimut, Hamilton Lane and Pimco eye China expansion
Shanghai has been working to boost foreign trade and inflows of foreign capital since the reopening of China’s economy in the first quarter of this year.
It has also set itself an economic growth target of 5.5 per cent for 2023, half a percentage point higher than the national goal, based on expectations of surging foreign direct investment (FDI) and strong exports. The city’s gross domestic product expanded 3 per cent in the first quarter, compared to growth of 4.5 per cent across the country.
In April, the city’s government announced that it would encourage district-level authorities to offer one-time cash awards to new FDI projects and also to foreign investors who reinvest their profits in the city.
