RQFLP is more flexible than another program to allow investment from overseas yuan funds, the Renminbi Qualified Foreign Institutional Investor (RQFII) program, according to a statement by global law firm Mayer Brown. While the RQFII program is limited to investments in the public securities and debt markets, RQFLP allows equity investments in non-listed firms, and private placements in listed companies and industry investment funds.
Also, foreign investors will not be subject to any foreign exchange conversion quota, unlike under the QFLP. It is thought the QFLP quota approved as of mid-August 2012 was around 2.6 billion yuan since its introduction in January 2011.
However, like the QFLP program, the RQFLP has not been granted national recognition by the National Development and Reform Commission (NDRC). This means it is still considered as a foreign investment, and subject to the same regulations as other foreign investments.
Haitong International is the first institution to be awarded a RQFLP license.
Hubert Tse, senior partner at Shanghai-based law firm Boss & Young, likened the RQFLP to its sister program, the QFLP, in terms of the pattern of uptake, as regulators begin cautiously in the first few months before ramping up investment limits.
Despite the lack of national status, Tse told China Money Podcast that the programs still had advantages for foreign entities looking to invest into the mainland and their local counterparts.
First, you have an onshore fund and can attract capital from domestic LPs, Tse said. ou will also have a higher profile, more opportunity to build local relationships and networks. The disadvantages would be when a QFLP fund makes investments into a Chinese company, it will change the company to a foreign-invested enterprise subjected to more scrutiny and compliance. In addition, when this company wants to go public in China, it will also go through more processes. /p>
