Foreign hedge funds set to get yuan fundraising toehold
Shanghai plans to allow foreign hedge funds to raise yuan capital from mainland investors to be invested in overseas securities
Shanghai has started the countdown to the introduction of a "qualified domestic limited partner" (QDLP) scheme, which will allow foreign hedge funds to raise yuan capital on the mainland to make investments in overseas securities.
The city has submitted an application to the country's foreign exchange regulator for a US$5 billion quota, which may then be distributed to funds wishing to participate in the scheme.
Shanghai's move comes as it faces competition from Qianhai, an experimental financial zone in Shenzhen that is being used as a testing ground for freer yuan usage and capital account convertibility.
Government officials said the application for the investment quota was in the final stage of preparatory work for the launch of the scheme, although a launch date had yet to be decided.
An official with the Pudong Financial Services Bureau said: "The QDLP programme will be launched sooner rather than later. The city officials are very active in pushing ahead with major liberalisation, including the QDLP."
Under the QDLP scheme, qualifying foreign hedge funds must be registered with the local authorities before they can convert yuan funds that they will be allowed to raise from mainland high-net-worth individuals into foreign currencies for securities investments abroad.