Caixin
Apr 13, 2021 05:00 AM
FINANCE

China Approves $5 Billion Quota for Hainan’s QDLP Pilot Program

Wang Chunying, deputy head of the State Administration of Foreign Exchange, at a press conference April 12.
Wang Chunying, deputy head of the State Administration of Foreign Exchange, at a press conference April 12.

China’s forex regulator has approved a $5 billion quota for a pilot program of Qualified Domestic Limited Partnership (QDLP) in the Hainan free trade port, and the program will start very soon, an official said.

The QDLP program will make it easier for domestic investors inside the free trade port to invest in foreign assets. Meanwhile, Hainan will also be included in a pilot program of Qualified Foreign Limited Partnership (QFLP) for foreign investors to tap Chinese equity assets. The State Administration of Foreign Exchange (SAFE) didn’t provide an update on progress in the QFLP program at a press conference Monday.

As part of plans to liberalize financial services further in the southern island province, SAFE will support Hainan in launching a free trade account, through which businesses can settle cross-border transactions in local and foreign currencies and conduct overseas financing business, SAFE deputy head Wang Chunying said at the press conference.

The People’s Bank of China and the SAFE will also support Hainan in facilitating renminbi settlement for cross-border trade and investment, Wang said.

Last Friday, China’s financial regulators issued a guideline of 37 pilot measures to open up financial services further in the Hainan free trade port, 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 plans, 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.

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 available in Beijing and Shanghai, while the QFLP program can be accessed in more cities, including Guangzhou, Shenzhen and Tianjin.

Contact reporter Denise Jia (huijuanjia@caixin.com)

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