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Allocation of RQFII Quota to Ireland Facilitates Direct Investment in China
AUTHOR(S): Tara Doyle, Michael Jackson, Dualta Counihan, Joe Beashel, Anne-Marie Bohan, Shay Lydon, Liam Collins, Philip Lovegrove, Elizabeth Grace, Oisin McClenaghan, Michelle Ridge
PRACTICE AREA GROUP: Asset Management and Investment Funds
The Central Bank of Ireland (“Central Bank”) has announced that the People’s Bank of China has allocated a RMB 50 billion quota for Ireland under the Renminbi Qualified Foreign Institutional Investors (“RQFII”) scheme.
The allocation enables Irish domiciled investment managers, alternative investment fund managers and UCITS management companies (“managers”) to apply to invest directly in Chinese equity and bond markets, including China A shares (shares in China-based companies that are traded on a Chinese stock exchange), offering direct China exposure to investors. Irish managers may now apply to the relevant Chinese authorities to be granted a certain portion of the quota.
The quota allocation arises from engagement between the Irish government and Chinese authorities and increases the range of investment options available to Irish domiciled managers. This engagement, together with supervisory cooperation between the Central Bank and the People’s Bank of China, will further support the economic and financial linkages between Ireland and China. The granting of the RQFII quota demonstrates China’s recognition of Ireland as an international fund domicile of choice and the availability of the RQFII scheme will be particularly useful for fund managers who use Ireland as a platform for cross-border distribution.
The announcement of the RQFII allocation follows the Central Bank’s decision earlier this month to permit Irish domiciled UCITS and alternative investment funds (“AIFs”) to invest in China A shares through the Shenzhen-Hong Kong Stock Connect (“Shenzhen Connect”) programme, which was launched on 5 December 2016. Shenzhen Connect is a joint initiative between the Stock Exchange of Hong Kong and the Shenzhen Stock Exchange (“SZSE”), which enables international investors to purchase shares listed on the SZSE. The market infrastructure arrangements under Shenzhen Connect are identical to those provided for under the original Shanghai-Hong Kong Stock Connect (“Shanghai Connect”) model, launched in November 2014 and which is also open to Irish UCITS and AIFs. The Central Bank updated its questions and answers documents on UCITS and AIFs earlier this week to clarify the access arrangements for Irish funds to Shenzhen Connect. Matheson partners were closely involved in the submission by the Irish Funds Industry Association (Irish Funds) to the Central Bank that preceded the Central Bank’s decision to permit investments through Shenzhen Connect.
Matheson advised the first Irish fund investing in China A shares and welcomes these positive developments facilitating managers in capturing the economic growth of China and making it available to investors in Irish domiciled funds.