Institutional investors satisfying certain criteria may directly remit RMB funds raised overseas to Shanghai to set up private equity funds for private equity investments under the pilot RMB Qualified Foreign Limited Partner ("RQFLP") program.

Detailed implementing rules are yet to be formulated, but the RQFLP pilot program will be based on the Qualified Foreign Limited Partner ("QFLP") and the RMB Qualified Foreign Institutional Investor ("RQFII") programs. Some notable differences do exist:

  • Use of offshore RMB: unlike the QFLP program, qualified foreign limited partners under the RQFLP program may use offshore RMB as opposed to foreign currency to set up private equity funds in China.
  • Private investments: unlike the RQFII program, which is limited to investments in securities markets, qualified foreign limited partners under the RQFLP program may use offshore RMB capital to make equity investments in non-listed companies, private placements in listed companies and industry investment funds.

It is thought that the RQFLP program will initially be limited to the Hong Kong subsidiaries of Chinese assets management companies and brokerage firms. Sources disclosed that Haitong International Securities Group Limited, the Hong Kong based subsidiary of Haitong Securities Company Limited, will be the first qualified investor to launch RQFLP products in Hong Kong. The Bank of Shanghai will provide custody services.

While no detailed rules are yet available, it is expected that the RMB funds set up under the RQFLP program will be considered foreign capital, making it subject to the rules and restrictions on foreign investments. It is also reported that there will be no quota limitation on the RQFLP products.