Recent developments in cross-border channels

Earlier this month, the Shanghai Municipal Financial Regulatory Bureau (SMFRB) announced that a number of global asset management companies including Hamilton Lane, CCB International, CDH Investments and JAFCO Asia have been approved as Qualified Foreign Limited Partners (QFLP), whereas BlackRock and Anzhong Investment have been granted approval to participate in Qualified Domestic Limited Partners (QDLP) business.

BlackRock’s retail fund management company has become the first wholly foreign-owned retail fund manager to be granted a QDLP licence in China, meanwhile Anzhong Investment has become the first wholly-foreign-owned-enterprise private fund management (WFOE PFM) to conduct QDLP business in China.

In addition, according to the SMFRB, a number of global asset management companies have been granted additional QFLP or QDLP quotas, and in the meantime several managers such as Neuberger Berman are planning to apply for additional quotas. It is considered as a sign of their confidence in Shanghai’s financial market in the long term, despite the uncertainties brought by the COVID-19 situation in the city.

In May 2021, the Shanghai Government issued Several Opinions on Accelerating the Construction of Shanghai Global Asset Management Centre (Opinions),which include its plan to improve the QDLP and QFLP regimes, such as to encourage eligible institutions to apply for QDLP or QFLP licences, and for the first time to allow foreign asset management institutions to use the same entity to operate its QDLP and WFOE PFM business. We consider the above recent developments are further steps following the Opinions, and we expect that in the long term more international fund managers may expand their business in China to take advantage of the cross-border regimes.

China adopts the Futures and Derivatives Law

On 20 April 2022, China adopted the Futures and Derivatives Law (the FDL, available here in Chinese). It will take effect on 1 August 2022.

The FDL will be the fundamental law in China regulating the futures market and the over-the-counter derivatives market in China. It is composed of 13 chapters focusing ontrading in futures and derivatives, settlement and delivery, protection of investors,supervision of institutions, cross-border trading and regulatory cooperation, and legal liability.

It is worth noting that there is a chapter in the FDL specifically regarding cross-border trading and regulatory cooperation, which provides for the legal basis for foreign participants to participate in the Chinese futures market. According to the FDL, an overseas institution that plans to engage in marketing, promotion, or trade solicitation in the futures market within China shall obtain the approval of the China Securities Regulatory Commission, and the relevant provisions of the FDL shall apply.