Shanghai starts vetting outbound investment scheme…

By Samuel Shen and Elias Glenn

BEIJING/SHANGHAI, Dec 20 (Reuters) – Shanghai has started vetting licence applications for an outbound investment scheme allowing subsidiaries of global asset managers to raise funds for investment overseas, China’s foreign exchange regulator said on Wednesday.

The city plans to hand out quotas within the existing limits of the Qualified Domestic Limited Partnership (QDLP) scheme, the State Administration of Foreign Exchange said in response to questions from Reuters.

On Tuesday, Reuters reported that Shanghai planned to revive the scheme this week. No QDLP quotas have been issued since an unofficial suspension late in 2015, when China tightened capital controls amid turmoil in its stock and currency markets.

“Shanghai has recently continued to press ahead with the QDLP pilot scheme and has started vetting QDLP licences with plans to grant institutions quotas within the existing QDLP limit,” the regulator said in an email.

The pilot scheme has boosted options for allocation of overseas assets by domestic residents and will help Shanghai develop into an international financial centre, it added.

It did not say what the current quota limits were.

Between 2013 and 2015, Shanghai handed out three batches of QDLP quotas worth a combined $1.23 billion to 15 asset managers, such as alternative investment manager Oaktree Capital and hedge fund houses Winton, Citadel, OZ Management and Man Group.

People with direct knowledge of the plan told Reuters the authorities were expected to award each qualified asset manager a quota of $50 million this time round.

Domestic media have quoted foreign institutions such as BNP Paribas Asset Management, British asset manager Aberdeen Standard, and South Korea’s Mirae Asset as saying they were interested in getting QDLP licences.

The move to reopen the gates for QDLP, at a time of a robust rally in global financial markets, shows Beijing is increasingly confident about pressing ahead with financial deregulation as its fears of capital outflows and yuan depreciation recede.

The scheme allows foreign asset managers to raise funds from wealthy Chinese individuals, via subsidiaries in China, up to a set figure, and invest them in a broad range of assets overseas, including hedge funds and distressed debt.

But there is no sign of a resumption of the larger Qualified Domestic Institutional Investor (QDII) scheme, which allows Chinese investors to buy overseas stocks and bonds and which was also unofficially suspended. (Reporting by Elias Glenn and Samuel Shen; Writing by Brenda Goh; Editing by Clarence Fernandez)

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