Caixin
Apr 10, 2021 05:03 AM
FINANCE

China Issues Guidelines on Opening Up Hainan Financial Sector

Yangpu Port at Hainan.
Yangpu Port at Hainan.

China’s financial regulators issued guidelines Friday to further open up financial services in the southern island province of Hainan, including increasing yuan convertibility and allowing market access to foreign investors.

The guidelines are another step in a massive plan announced in June to develop Hainan over the next 15 years and make it an “internationally influential, high-level” port by 2050. The guidelines include 37 pilot measures but still need detailed implementation policies, industry experts said.

Chinese President Xi Jinping announced the decision to build Hainan into a free trade port in April 2018 at a ceremony to mark the 30th anniversary of the establishment of the Hainan Special Economic Zone. In June, the State Council released a master plan, including 60 key measures covering tax breaks and relaxed regulation that will make foreign trade and investment easier.

A free trade port in general is much broader than a free trade zone, which normally covers only trade in goods. It allows more freedom for investment, offshore finance and trade, employment and business operations.

Under the newly issued guidelines, foreigners will be allowed to invest in wealth management products issued by financial institutions in the Hainan free trade port as well as private equity asset management products provided by securities and futures companies, public offering securities investment funds and insurance asset management products, the People’s Bank of China (PBOC) said in a joint statement with other financial regulators.

Currently, foreigners can invest in China’s domestic asset management products through the Qualified Foreign Institutional Investor program and its yuan-denominated sibling, the Renminbi Qualified Foreign Institutional Investor program. China scrapped quota restrictions on the two programs last year after more channels were made available for foreign investors to participate in China’s financial markets without limits.

The Hainan free trade port will also be included in a pilot program involving the Qualified Foreign Limited Partnership (QFLP) and Qualified Domestic Limited Partnership (QDLP) programs to make it easier for foreign investors to tap Chinese equity assets and domestic investors to invest in foreign assets.

Since 2011, China has launched QDLP and QFLP pilot programs in selected cities as the country moves to liberalize capital markets. The QDLP program is currently available in Beijing and Shanghai, while the QFLP program can be accessed in more cities including Guangzhou, Shenzhen and Tianjin.

Under the QFLP program, qualified foreign investors are allowed to freely remit funds outward and inward in a balance management mode and simplified foreign exchange registration procedures, according to the guidelines.

Under the QDLP program, quota will be granted to the Hainan free trade port on an annual basis, and additional quota can be issued each year according to certain rules, the guidelines said, without specifying the quota amount.

The guidelines also said Hainan will explore relaxing policies on cross-border transactions by individuals, allowing foreigners working in the Hainan free trade port to conduct various investments in China, including securities investments.

Hainan will support qualified institutions to set up joint-venture public offering fund management companies in the island and support qualified overseas financial institutions to wholly own or invest in futures companies in Hainan. Private equity funds investing in seed industry, modern agriculture and other key areas will be given a speedy approval in registration, the guidelines said.

Eligible local companies will be encouraged to conduct initial public offerings, mergers and acquisitions, restructuring, and bond issuance on interbank bond markets and exchanges. Currently, there are only 31 Hainan-based listed companies.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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