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QFLP scheme: IDG Capital, Brookfield among 7 firms granted access by Shanghai to unlisted firms

  • Shanghai ‘determined to conduct innovations in the finance sector at Lingang’, local financial regulator says
  • Other newly approved QFLPs include Vitalbridge, Cathay Capital, Kasikornbank, Ausvic Capital and CM Venture Capital

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The Bund in Shanghai. Beijing launched the QFLP scheme in China’s financial capital in 2011. Photo: Xinhua
Daniel Renin ShanghaiandZhang Shidongin Shanghai
Shanghai has approved another seven institutions – including IDG Capital and Brookfield – for the qualified foreign limited partners (QFLPs) investment scheme, which allows foreign funds to buy shares in unlisted companies and launch yuan-denominated venture-capital products.
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A signing ceremony was held on the sidelines of the Lujiazui Forum, the mainland’s most influential financial conference, which normally draws China’s top financial and securities regulators, as well as top bankers and financiers. These seven institutions will conduct investment and fundraising activity in the city’s Lingang free-trade zone, a 120 sq km coastal area linked to the Yangshan Port by the Donghai Bridge.

The firms will help promote the QFLP programme, as Shanghai is “determined to conduct innovations in the finance sector at Lingang”, the Shanghai Financial Regulatory Bureau said in a statement on Thursday. The other newly approved QFLPs include Vitalbridge, Cathay Capital, Kasikornbank, Ausvic Capital and CM Venture Capital.

Beijing launched the QFLP scheme on a trial basis in 2011 with big-name asset managers such as Blackstone among the first batch of qualified investors in Shanghai. Seen as a bold step taken by China’s financial regulators towards making the yuan fully convertible under capital accounts, the scheme continues to be run on a trial basis.

Under the scheme, foreign investors are able to combine capital they raise abroad with cash in yuan committed by mainland investors, creating the scope for giant funds to explore the potential of China’s high-growth companies. Moreover, while QFLP funds can invest in Chinese companies directly without regulatory approval, other foreign investors will have to obtain these approvals before investing in such firms.

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“It is necessary to widen the use of yuan freely and facilitate its convertibility amid a deepened reform of the foreign-exchange regulatory mechanism,” Zhou Xiaochuan, the former governor of China’s central bank, told a panel at the Lujiazui Forum, adding that these measures will help Shanghai build itself into a global financial centre.
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