A plan to allow foreign investors to buy mainland securities using yuan raised offshore could be implemented by the end of this year, a senior Hong Kong government official said on Friday.
Also known as mini-QFII or renminbi-QFII, the programme would offer foreign investors holding yuan a crucial avenue to invest the Chinese currency, Julia Leung, Hong Kong's under-secretary for financial services and the treasury, told Reuters Insider in an interview. "We are hopeful that it will be launched by the end of this year. We can never say for sure, but we hope so," she said.
Before the scheme was announced by China's Vice-Premier Li Keqiang on Wednesday, many investors had been reluctant to hold too much yuan despite China's solid economic growth and Beijing's drive to promote the use of the currency. Under the scheme, modelled after the larger Qualified Foreign Institutional Investor programme, foreign investors will be allowed to buy mainland securities up to an initial quota of 20 billion yuan ($3.1 billion), a move aimed at internationalising the use of the currency.
"It's not the size that matters," Leung said. "It's a start, and we expect that as the pilot project goes on, it will be expanded." Several investment banks including HSBC Holdings Plc have said the small size of the quota was a result of China's fear of uncontrolled capital inflows. The country currently has a closed capital account.
The mini-QFII programme would be administered by China's stock market regulator, the China Securities Regulatory Commission, which would also decide who would be first to receive a licence, Leung said. "The thinking, as I understand it, initially at least, is to have the subsidiaries of fund houses or securities companies with a mainland background," Leung said.
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