CCB International Securities expects Beijing will further relax rules on foreign investment in the mainland market by announcing the long-awaited mini-QFII pilot scheme before October 1.
The mini-QFII is seen as an expansion of the existing qualified foreign institutional investors (QFII) programme, which allows designated foreign investors, usually big fund houses and brokerage firms, to invest in the A-share or bond market in China.
Banny Lam Chiu-kei, associate director of CCB International Securities, said the mini-QFII pilot programme would allow foreign investors to invest in yuan, which is different from the existing scheme which requires investors to bring in US dollars and then convert them into yuan.
'The mini QFII will allow foreign investors to invest directly in yuan. As such, the fund companies or brokers in the city could launch more yuan investment products in the city. Banks will also use higher interest rates to attract more yuan deposits.'
The mainland allowed Hong Kong banks to offer yuan deposits and services in 2004, and trading companies have been able to settle trade in yuan since July last year. But yuan deposit and other yuan products only took off earlier this year after the rules were relaxed several times.
Lam said the mini-QFII scheme and other products would lead more individuals and firms to transfer their money into yuan, which would boost the currency further.