Competition between international and China-owned fund management companies is set to intensify in Hong Kong as a result of the much anticipated launch of mini-QFII, now being referred to as the RQFII (renminbi-qualified foreign institutional investor) programme. The programme allows licensed foreign investors to buy renminbi-denominated A shares and fixed income securities with offshore Chinese currency.

As is most often the case with regulatory reform in China a pilot scheme was announced first that is likely to become the blueprint for further liberalisation. The China Securities Regulatory Commission (CSRC) published RQFII rules in mid-December allowing an initial Rmb20bn ($3.2bn) to be invested in China’s equity and fixed income onshore markets.

Under the programme, subsidiaries of Chinese domestic fund management and securities companies based in Hong Kong are allowed to invest renminbi held offshore into the domestic security markets, with equities initially capped at 20 per cent of the total. The rules also favour Hong Kong domiciled mutual funds over other jurisdictions, providing an additional boost for the Hong Kong fund market and its service providers in the process.