Renminbi Qualified Foreign Institutional Investor (RQFII) status is granted to qualified Chinese fund managers and securities companies to allow their Hong Kong subsidiaries to channel RMB raised in Hong Kong to invest directly in the China bond and equity markets (including the inter-bank bond market and the exchange-traded bond market).
Announced last month, the pilot scheme to allow qualified Hong Kong fund managers and investment companies to invest offshore RMB funds in China's securities markets has been lauded as another major milestone in the process of transforming RMB into an internationally accepted and widely used currency, and also a confirmation of the strategic significance of Hong Kong as a testing ground for financial reforms in China.
Allowing investment in the Chinese equity market by means of the RQFII scheme was part of the policies and measures China’s Vice Premier Li Keqiang set out, in August last year, to expand the cross-boundary use of the RMB.
According to its guidelines, within the pilot project, which provides for an initially-low RMB20bn (USD3.17bn) investment cap, an RQFII fund should be comprised of at least 80% in RMB debt instruments issued in mainland China and an optional not-more-than 20% in equity investments in that market. Subscriptions and redemptions of fund units are settled in RMB.
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