QFLP scheme may launch a Shanghai pilot project in December and receive a US $ 3 billion quota (VC284)
In the morning of November 25th, the State Administration of Foreign Exchange recently granted Shanghai a quota of US $ 3 billion to allow it to carry out pilot projects so that foreign currencies can be directly converted into RMB and participate in private equity fund investment.
In addition, the State Administration of Foreign Exchange may also introduce relevant regulations and QFLP plans in December. The new QFLP plan may follow the previous QFII, which allows foreign investors to purchase domestic stocks and bonds.
The analysis believes that this move will be beneficial to large international investment institutions, such as TPG, Carlyle, Blackstone, etc. These institutions are or have begun to raise RMB funds. In addition, the introduction of the QFLP program will also open new investment channels for foreign pensions, insurance funds, banks, and insurance companies.
According to industry insiders, the quota obtained by Shanghai looks small, but it has far-reaching symbolic significance. "Obtaining quotas will increase the visibility of institutional brands and make future fundraising easier."
Because local governments need to change funds to flow into private equity investment to maintain local economic development, the Chinese government later relaxed its controls on foreign-funded institutions in late 2009 to allow them to raise RMB funds. The ability to directly raise RMB funds allows foreign institutions to simplify the legal framework and face less supervision when acquiring state-owned enterprises.
The relevant documents stipulate that foreign investors who apply the QFLP program need at least 500 million US dollars of management funds, and they must have more than 2 years of relevant investment experience. The State Administration of Foreign Exchange, the Ministry of Commerce and the Shanghai Municipal Government will jointly participate in the formulation of QFLP rules.
The Chinese government is currently fighting speculative capital inflows and inflation. Since the second quantitative easing in the United States, the small QFLP plan has been shelved, which allows overseas RMB to invest in the domestic market. The above situation makes some people worry that the QFLP scheme may be shelved.
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