According to the update on 5th June 2019 on the Chinese Central Bank website, the State Council has approved the expansion of pilot area under the Renminbi Qualified Foreign Institutional Investors scheme into the Netherlands, with a defined quota of 50 billion RMB (approx. 6.5 billion euros). As it deepens the cooperation on finance between China and the Netherlands, the channels for foreign investors to allocate RMB-oriented assets have been widened. The RQFII also serves the function of elevating the level of open market in China, which contributes to bilateral trade and investment. News on 12th June reported Robeco, a leading international Dutch firm specialized in assets management is proactively looking into additional possibilities to invest in the Chinese capital market, centered around its Shanghai office.
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RQFII is the abbreviation for RMB Qualified Foreign Institutional Investors. The RQFII policy was established in 2011. Prior to this, the QFII policy was announced as early as in 2002, which can be recognized as Qualified Foreign Institutional Investors. The QFII scheme was introduced as a certification system explicitly for foreign institutional investors to enter and invest in the Chinese capital market. The addition of RQFII scheme contributed to internationalization of RMB. For many foreign institutional investors, being certified under either of the two schemes will give them access to invest in Chinese domestic security market, conditioned with a defined investment quota. RMB is the quote currency if a foreign investor operates under the RQFII scheme.
What is worth of the attention is the proposed convergence of the RQFII and QFII schemes at the beginning of 2019. Insofar, many foreign firms have already been certified under the RQFII directly or indirectly via their Hong Kong subsidiaries. Some early birds in Europe include Ashmore Investment Management and BlackRock Advisors from the UK, BNP Paribas Asset Management in France and Swiss Reinsurance Company in Switzerland. This proposed merger will offer foreign investors two major remarkable benefits: simplified procedures with shortened waiting time in application, and a lowered threshold on capital to become qualified. China is progressively opening up its capital markets to more foreign investors in both US dollars and in Chinese RMB. If this convergence initiative is to be approved, the Chinese capital market will become more attractive to global investors. Some known propositions are: quantitative requirements to be annulled, but institution types and compliance conditions are to be reserved. Simplified application procedures and shortened waiting time are suggested. The scope of investment is also proposed to be enlarged after the convergence, which means more opportunities for many investors optimizing their global assets.
Proposed additional investments (non-exhaustive list):
- Stocks on the National SME stock transfer system (New OTC (Over the Counter) market);
- Repurchase of bonds;
- Private investment funds;
- Financial futures;
- Commodity futures;
- Options.
Specific categories are still subject to approval of supervisory agencies prior to announcement.
Global Connect Admin B.V. | Xuan Hao
