The mainland's leading asset management firms have begun moves to attract foreign investors as they prepare to launch qualified foreign institutional investor products. The move would further boost the country's yuan-denominated A-share market, which was already looking to attract overseas funds in coming years, analysts said. Fund company officials said they were speeding up efforts to tap mounting foreign interest in the mainland equity market but would not be able to raise QFII funds soon owing to regulatory hurdles. Only companies registered overseas can apply for a QFII licence and set up funds to raise money abroad to buy shares on the mainland. The country's three main fund houses, China Asset Management, China Southern Fund Management and Harvest Fund Management, are pioneering moves to establish offshore units to comply with the rules. However, they admitted that it would be some time before they could start selling products. China Southern set up a joint venture with Oriental Patron Financial Group in July last year and planned to seek a QFII licence when conditions permitted. China Asset and Harvest Fund said they had also received approval to establish overseas units. A spokesman with China Southern said the Hong Kong venture was taking a long view on QFII products. Another hurdle is the China Securities Regulatory Commission's requirement that an overseas institution have five years of experience before it can apply for QFII products. 'There are a number of legal obstacles, and we are very interested in how [China Southern Oriental Patron Asset Management] and regulators will resolve these issues,' said Min Tha Gyaw, a senior associate at fund consultancy Z-Ben Advisors. 'Oriental Patron would not have applied for the licence if they did not already have some general understanding with regulators.' The QFII fund issuance by a domestic asset manager would offer an alternative to foreign investors who hope to profit from China's growing economy and the rising market. The Shanghai Composite Index dived 65.4 per cent last year, the biggest drop in its 18-year history, before rebounding 30.4 per cent this year because of speculative capital. China embarked on the QFII programme in 2003 when it started to allow select foreign institutions to invest in A shares. As of February, 79 foreign investors had QFII licences to buy mainland-listed shares. Z-Ben predicted Beijing would grant a US$2.8 billion annual QFII quota in the next five years. To date, the total quota for QFIIs is valued at US$3 billion. 'If mainland fund companies are allowed to manage QFII products, they may be attractive to foreign investors for their long-term experience on the market,' said Zhou Liang, the head of China investment and advisory at Thomson Reuters. 'What they can do now is to expand their overseas sales network.' The mainland's 61 fund houses suffered setbacks last year after their funds lost 40.8 per cent of their asset value following a fourfold jump in 2007, according to Z-Ben.