Bank of China's Renminbi Settlement Service in
In late July this year, the Bank of China unveiled its Chinese
Renminbi (RMB) Settlement Service in Sydney. The Settlement Service
utilises the Australian Stock Exchange's Austraclear
infrastructure to allow Australian companies to use RMB as a
settlement currency in cross-border transactions. Moving forward,
the Settlement Service could be used to facilitate the development
of RMB denominated bonds and structured investments in the
The Renminbi Qualified Foreign Institutional Investor Program
(RQFII Program) was established in late 2011. It allows
non-People's Republic of China (PRC) institutional investors,
from certain approved jurisdictions (Relevant Jurisdictions), to
invest in certain PRC onshore financial instruments, the most
relevant of which are stocks, bonds, warrants and other securities
listed on PRC stock exchanges, using offshore RMB.
So far, approved Relevant Jurisdictions include London, Paris,
Singapore, Hong Kong, Taiwan, South Korea and Germany. Hong Kong
tops the list, in terms of the size of its RQFII quota provided by
the China Securities Regulatory Commission (CSRC), at 270 billion
yuan. The United Kingdom (UK), France, South Korea and Germany were
each provided with RQFII quotas of 80 billion yuan, while Singapore
was provided with a quota of 50 billion yuan.
It has been suggested by some commentators, that the recent
launch of the Chinese RMB Settlement Service in Sydney would
foreshadow the granting of a RQFII quota to Australia (and in turn
Australia-based financial institutions) later this year.
The Reserve Bank of Australia has identified an Australian RQFII
quota as an important step in facilitating cross-border RMB
denominated investment transactions between the PRC and Australia,
and an area of significant potential growth for Australia's
funds management industry.
Participation in the RQFII Program is open to financial
institutions with a principal place of business in a Relevant
have obtained an asset management licence (with the relevant
authorisations) issued by a regulator in the Relevant Jurisdiction,
operate an asset management business.
Assuming applicants meet this requirement in a Relevant
Jurisdiction, the RQFII application process in the PRC is a two
stage process involving the CSRC and the State Administration of
Foreign Exchange (SAFE).
An Australian RQFII applicant would first apply to the CSRC for
the grant of a RQFII licence. If successful, the Australian RQFII
applicant would then apply to the SAFE for an investment quota.
What the RQFII Program can Offer Australian Fund
Participation in the RQFII Program will allow Australian fund
managers to create new products and investment strategies, which
include PRC onshore financial instruments, that were previously not
available to them. Specifically, the RQFII Program will allow
Australian fund managers to deal directly in the PRC onshore
securities market and, as a result, give them access to:
PRC A-shares and fixed-income bonds of PRC entities not
currently available offshore
securities in numerous fast-growing Chinese sectors such as
healthcare, technology, multimedia and consumer sectors not
currently listed outside the PRC, and
onshore fixed-income bonds.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The TPP could have a significant positive impact on the investment and financial services of Australia and Singapore.
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