On 25 September 2020, China Securities Regulatory Commission (CSRC), People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) released the Measures for the Administration of Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors (the Measures) as a measure of further opening-up of China’s capital market. Meanwhile, the CSRC released the Provisions on Issues Concerning the Implementation of the Measures for the Administration of Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors (the Provisions) to facilitate the implementations of the Measures.
With the Measures and the Provisions coming into effect on 1 November 2020, China’s QFII and RQFII schemes introduced since 2006 and 2013 respectively and which have been governed by separate set of rules and regulations will be integrated, and past QFII and RQFII rules and guidelines will be invalidated. The new QFII/RQFII integrated scheme will be further liberalized with eligibility requirements further relaxed and application procedures streamlined, among others.
Most noteworthy and which has been highly anticipated by the market is the expansion of investment scope under the new QFII/RQFII scheme. Further, under the new rules, QFIIs and RQFIIs may appoint a domestic private fund manager or investment fund manager which is either its subsidiary or group company as its investment advisor. This will clearly enable private fund management enterprises or investment fund management company set up by foreign fund managers in China to act as investment advisor to the parent or group QFII or RQFII licensed managers in investing in China onshore securities and futures markets. Notably, global fund managers establishing and developing onshore capabilities through setting up fund management entity in China can now offer this on its global China investment products.
Institutions currently holding multiple QFII/RQFII qualifications may also wish to note the new rules indicate there may be non-trade transfer for transfer of qualification to another entity under same control, rearrange its accounts or change manager of its fund products or accounts, to improve investment and operation efficiency or to streamline account structure.
Foreign managers should also note that the Measures clearly require a qualified foreign investor to lawfully aggregate the interests of its shareholdings in a company including shares listed in overseas markets and shares listed in China domestic markets, and comply with relevant disclosures rules (including rules on parties acting in concert). On the other hand, qualified foreign investors may exercise rights as shareholders of domestic securities, by itself or through its custodian, domestic securities company, an independent director or the secretary of the board of directors of an exchange-listed or NEEQ-admitted company, or a foreign investor under its name.
See our Legal Update for more details of the integrated and updated QFII/RQFII scheme:
