Hong Kong RMB flows back to China

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Hong Kong RMB flows back to China
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The China Securities Regulatory Commission, People’s Bank of China and State Administration of Foreign Exchange published on 16 December 2011 the RMB Qualified Foreign Institutional Investors [RQFII] Fund Management Companies and Securities Companies’ Investment in Securities inside China Tentative Measures (CSRC Order No. 76). On the same day, the CSRC also promulgated the Implementing Provisions for the Tentative Measures (CSRC Announcement [2011] No. 37). Both the Tentative Measures and the Implementing Provisions came into force on publication.

The Tentative Measures govern the use of RMB funds raised in Hong Kong by the Hong Kong subsidiaries of Chinese domestic fund-management companies and securities companies for investment in the Chinese domestic securities market. These Hong Kong subsidiaries are first required to obtain consent from the CSRC and an approved investment quota from the State Administration of Foreign Exchange.

Article 6 of the Tentative Measures provides that, to become a qualified institution under the pilot scheme, a Hong Kong subsidiary must meet the following requirements: (1) be certified as an asset management business by the Hong Kong regulators and have experience as an asset manager. They must also be financially sound and have a good credit standing; (2) have effective corporate governance and internal controls. Staff must meet the standards required for practice by Hong Kong regulators; (3) applicants and their Chinese domestic parent companies must carry out business in accordance with relevant regulatory standards, and not have been subject to major punishment by the local regulators for the previous three years; (4) applicants Chinese domestic parent companies must be qualified to conduct securities and asset management business.

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