Chongqing launches RQFLP program for offshore RMB funds

It is an extension of the Qualified Foreign Limited Partner (QFLP) which was introduced two years ago in Shanghai, Beijing and Chongqing to enable overseas players to convert foreign currency into renminbi for onshore investments.

However, the program received lukewarm response due to concerns about the licensing process and regulatory requirements regarding investment quotas and foreign currency settlements. Some foreign firms simply put investment plans on hold even after being awarded QFLP quotas, according to AVCJ sources.

Under RQFLP, the foreign currency approval requirements would not apply because the capital contributions would already be renminbi-denominated, albeit raised offshore. Chongqing officals say that participants in the program would only require approvals from the local branches of the financial services office and the State Administration for Industry & Commerce, reducing the process to a maximum of 25 days.

"We have yet to decide what size quotas will be allocated to foreign investors, but ideally it would be RMB500 million to RMB1 billion per year," a local official told AVCJ, adding that the funds would be able to invest anywhere in China without restriction.

"We encourage foreign investment to support small- and medium-sized enterprises in Chongqing. However, real estate is a sensitive and restricted sector for investment. We might not consider such applications."

A few months ago, Shenzhen launched a similar renminbi convertibility experiment in Qianhai, allowing registered GPs to raise renminbi funds in Hong Kong. Shanghai has also initiated an RQFLP program for foreign players to invest in unlisted Chinese companies using renminbi raised offshore. The Hong Kong unit of Haitong Securities - Haitong International - will be the first participant, teaming up with Bank of Shanghai to raise a reported $100 million fund.

Any RQFLP initiative is dependent on the availability of renminbi deposits overseas. China has expanded efforts to promote the use of its currency in markets beyond Hong Kong, with Singapore and Taiwan offering direct renminbi clearing services from February. London is reportedly seeking to become the first renminbi clearing center in Europe.

At the end of 2012, the amount of customer deposits and the outstanding amount of certificates of deposit issued by Hong Kong banks totalled RMB720.2 billion ($116 billion), up 9% from RMB661.6 billion in 2011, according to the Hong Kong Monetary Authority.

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• Topics
• Greater China
• Renminbi fund
• GPs
• China
• Renminbi
• Fundraising
• Offshore
• QFLP