Global Trustee and Fiduciary Services News and Views Issue 50

Global Trustee and Fiduciary Services News & Views | Issue 50 | 2018 95 QDLP MRF SC WFOE Objective Enables Mainland-controlled access to limited range of hedge fund and mutual fund managers. Enables cross-border sales of mutual funds domiciled and authorised in both HK and China. Bilateral access for all investors to trade cross- border stocks/, equities, government bonds. Allows 100% ownership of Mainland-based company. Year started • 2013: 1st batch • 2015: 2nd and 3rd batch • 2018: new quotas • Launched: • 1 July 2015 • 2014: HK/Shanghai • 2016: HK/Shenzhen • 2017: Bonds • 2013 • Fund management: 2016 Licenses/Quota • 6 HF, USD50m each. • 5 HF, USD100m each. • 6 Long Fund — USD100m each. • New USD5bn quota from April 2018. • Northbound quota: RMB300bn. • Southbound Quota: RMB300bn (USD43bn). • At 1 March 2018, 50 Mainland funds approved in HK, 11 HK funds approved in China. • No license restriction • SC: daily quota for each, no overall aggregate. • BC: no quota restrictions. • No quota. • Requires registration with AMAC. • Enables asset raising in Mainland. Limitations • Need to establish a WFOE. • Not more than 20% may be invested in target market. • No more than 50% of investors by AUM from target market. • Daily quota. • Designated stocks only. • Fund raising limited to max 200 Qualified Investors. • All systems and decisions taken in China. Future development (June 2018) • Allow foreign banks to provide custody and FA. • Possibility to engage in domestic private securities investment fund management business by leveraging QDLP’s WFOE. • Relaxation of some restrictions. • Add ETFs. • See-through underlying investor under SC. • ETF Connect due in 2H2018. • Possible future impact for SWF management. • 100% FMC ownership to be allowed from 2020. Source: Citi, HK SFC, CSRC, market information.