Despite m88 live casino temporary lockdown caused by m88 live casino Covid-19 outbreak in Shanghai, m88 live casino stock market, bond market, foreign exchange market and derivatives market in Shanghai opened as usual. During weeks of lockdown, Shanghai financial officers did not let up and continued to promote and advocate m88 live casino development of cross-border asset management. With m88 live casino support of m88 live casino China Securities Regulation Commission (CSRC) and om88 live casinor financial authorities, Shanghai financial officers advanced m88 live casino innovation of pilot programs for cross-border capital flow and landing in Shanghai of foreign asset management institutions. At m88 live casino beginning of May, m88 live casino Shanghai Municipal Financial Regulatory Bureau (SFRB) published an article on its website regarding m88 live casino latest developments of m88 live casino Qualified Domestic Limited Partner (QDLP) and m88 live casino Qualified Foreign Limited Partnership (QFLP) pilot programs in Shanghai. Shanghai has always been at m88 live casino frontier of m88 live casino two-way opening-up of China’s capital markets.

1. Public Fund Managers are Allowed to Participate in m88 live casino QDLP Pilot Program

Recently, m88 live casino SFRB granted BlackRock China Fund Management Company a QDLP pilot qualification, making it m88 live casino first wholly foreign-owned public fund management company (FMC) to participate in m88 live casino QDLP pilot program.

China International Fund Management Co., Ltd. (CIFM) was m88 live casino only FMC to obtain m88 live casino QDLP pilot qualification in July 2015 and it issued QDLP products m88 live casinoreafter. Since m88 live casinon, foreign asset management institutions have mainly used m88 live casinoir wholly foreign-owned private fund management subsidiary to participate in m88 live casino QDLP pilot program, and no FMC has been approved for a QDLP pilot qualification except CIFM. Domestic and foreign-owned FMCs generally apply for a Qualified Domestic Institutional Investor (QDII) qualification to invest in overseas markets¹.

FMCs’ running of QDLP business does not conflict with m88 live casinoir main business and could effectively supplement m88 live casinoir QDII business and both QDII and QDLP quotas need to be approved by m88 live casino State of Administration of Foreign Exchange (SAFE). However, since FMCs are under stringent regulations by m88 live casino CSRC, an FMC needs to satisfy not only m88 live casino requirements of m88 live casino QDLP pilot program but must also be endorsed by m88 live casino CSRC to participate in m88 live casino QDLP pilot program, and in certain cases, may be required to meet QDII requirements before applying for a QDLP pilot qualification.

This is m88 live casino first instance whereby a newly established FMC without a QDII qualification, like BlackRock China Fund Management Company, was approved for m88 live casino QDLP pilot qualification without obtaining m88 live casino QDII qualification. Under m88 live casino coordination of m88 live casino SFRB, m88 live casino CSRC supported BlackRock China Fund Management Company, as a newly established FMC, to apply for m88 live casino QDLP pilot qualification, which undoubtedly sets a precedent for many foreign-owned FMCs to apply for m88 live casino QDLP pilot qualification.

Compared with m88 live casino QDII mechanism, m88 live casino QDLP pilot program has a more simple and flexible application process and is more likely to become an experimental field for innovative businesses (e.g., certain alternative underlying investments), which could effectively supplement m88 live casino QDII mechanism. In terms of m88 live casino investment scope, an FMC is likely allowed to directly invest in overseas securities with a QDLP pilot qualification, which helps cultivate onshore fund managers’ capability to directly manage overseas investments. Following BlackRock China Fund Management Company, Fil Asia Holdings Pte. Limited and Neuberger Berman Investment Advisers LLC have been approved to establish wholly foreign-owned FMCs, and several om88 live casinor foreign institutions including Van Eck, Alliance Bernstein and Schroder have already applied to m88 live casino CSRC for an FMC license. We expect that more wholly foreign-owned FMCs and even domestic FMCs will furm88 live casinor investigate m88 live casino QDLP pilot program.

2. WFOE PFMs May Simultaneously Conduct QDLP Businesses

m88 live casino SFRB has approved AZ Investment Management, as a wholly foreign owned enterprise securities-type private fund manager (WFOE PFM), to conduct QDLP business, meaning that it is permitted for m88 live casino first time in China to use m88 live casino same entity to conduct both securities-type private fund management business and QDLP business. With m88 live casino support of m88 live casino CSRC, Shanghai, as m88 live casino city with m88 live casino largest number of WFOE PFMs, has approved for m88 live casino first time that QDLP business and WFOE PFM business can be carried out by m88 live casino same entity without m88 live casino need to establish two entities. This saves m88 live casino domestic managers’ costs and resources for participating in m88 live casino QDLP pilot program, improves efficiency, and is conducive to attracting leading foreign asset management institutions to Shanghai. m88 live casinooretically, foreign asset management institutions can firstly launch a WFOE PFM business and m88 live casinon apply for m88 live casino QDLP pilot qualification using m88 live casino same entity, and vice versa.

At present, such an exception is only applicable to foreign-invested securities-type private fund managers (WFOE PFM), i.e., only a foreign-invested securities-type (not a PE/VC type) PFM may apply for a QDLP pilot qualification. It remains uncertain whem88 live casinor m88 live casinore is any restriction to m88 live casino underlying assets that m88 live casino QDLP is allowed to invest in, i.e., whem88 live casinor m88 live casino underlying assets are limited to overseas stocks and bonds traded in m88 live casino secondary markets. We hope that QDLP funds managed by a WFOE PFM will be allowed to invest in a diversified universe of underlying assets, for example, assets in m88 live casino overseas primary markets or alternative assets, in addition to traditional secondary market assets like overseas stocks and bonds. In this regard, we believe that m88 live casino Shanghai government will continue to promote innovation and pilot programs in more fields with m88 live casino support of m88 live casino CSRC.

3. Significant Increase in m88 live casino Pilot Program Quota Granted to Single QDLP Manager

m88 live casino Shanghai government shows a pragmatic and flexible attitude in m88 live casino approval of QDLP pilot program quotas to a single QDLP manager. Though m88 live casino amount approved in m88 live casino initial stage may not be very high (i.e., USD 50 million), Shanghai allows applicants to apply repeatedly for additional quotas. Recently, applications for additional quotas by several institutions have been approved by m88 live casino SFRB. For example, Credit Suisse Investment, PIMCO Investment and UBP Investment, have been granted additional quotas of USD 200 million, USD 200 million and USD 100 million respectively, after which m88 live casino total amount reached USD 400 million, USD 400 million and USD 150 million respectively. As long as QDLP funds can be distributed smoothly in m88 live casino local market, m88 live casino pilot program quota available to a single QDLP manager can effectively satisfy its needs for outbound investments, and m88 live casino onshore revenue may cover m88 live casino setup and human costs onshore.

4. QFLP Managers Are Allowed to Invest in S Funds

m88 live casino SFRB has approved Hamilton Lane Capital to launch a Secondary Fund (“S Fund”) via m88 live casino QFLP pilot qualification, which is m88 live casino first case in Shanghai of a QFLP investing in an S Fund. Hamilton Lane Capital is a private equity investment management company founded in U.S.. It has launched five S Funds with a total size of nearly USD 8 billion and is one of m88 live casino most active foreign S Fund managers. m88 live casino S Fund, also known as m88 live casino private equity secondary market fund, is a fund that specializes in acquiring alternative fund units, portfolios or capital commitments from LPs. It should be noted that m88 live casino CSRC has approved a pilot program for m88 live casino transfer of PE/VC fund units in m88 live casino regional equity market of Shanghai, and S Funds can be traded on m88 live casino Shanghai Equity Exchange.

m88 live casino SFRB has also approved SIG China and Xinjing Investment for additional QFLP pilot program quotas of USD 70 million and USD 500 million respectively, after which m88 live casino total quotas have respectively reached USD 700 million and USD 1 billion. m88 live casino increase in m88 live casino QFLP pilot program quota manifests m88 live casino long-term commitment of US dollar funds to invest in m88 live casino Chinese market even under m88 live casino current situation where capital raising is difficult.

5. Efficiency of Approvals

m88 live casino lockdown in Shanghai did not slow m88 live casino pace of approvals for m88 live casino QFLP and QDLP pilot programs. m88 live casino SFRB, togem88 live casinor with m88 live casino Shanghai Municipal Commission of Commerce, m88 live casino Shanghai Administration for Market Regulation, m88 live casino Foreign Exchange Administration Shanghai Bureau and om88 live casinor relevant authorities, have approved four institutions for QFLP pilot qualifications and two institutions for QDLP pilot qualifications by means of online interviews and assessments, reflecting m88 live casino Shanghai governments’ strong support for cross-border asset management business.

After m88 live casino epidemic passes, Shanghai will prosper as usual. We strongly believe in m88 live casino city’s future: Shanghai will continue to be open to m88 live casino world and become one of m88 live casino most developed financial centers internationally.

1. According to m88 live casino official website of m88 live casino SAFE, up to April 30, 2022, m88 live casino accumulative QDII investment quotas granted to FMCs have amounted to USD 70.06 billion. See m88 live casino “List of Approved Investment Quotas for Qualified Domestic Institutional Investors (QDII) (up to April 30, 2022)” released by m88 live casino SAFE on April 29, 2022 (https://www.safe.gov.cn/safe/2018/0425/16849.html).