December 19, 2017 / 7:01 AM / a year ago

Shanghai to resume issuing quotas for QDLP outbound investment scheme -sources

SHANGHAI/HONG KONG, Dec 19 (Reuters) - In a sign of China relaxing capital controls, Shanghai is reviving an outbound investment scheme that lets global asset managers raise money via subsidiaries in the city for overseas investment, four sources told Reuters.

There has been no issuance of Qualified Domestic Limited Partnership (QDLP) quotas since an unofficial suspension in late 2015, when China tightened capital controls amid turmoil in its stock and currency markets.

The Shanghai Municipal Financial Service Office will resume vetting QDLP applications this week, and will award each qualified asset manager a quota of $50 million, the people with direct knowledge of the plan said. They insisted on anonymity as they are not authorised to speak with media.

One of the people said the regulator is expected to issue about half a dozen QDLP licenses in the latest round, in the first quarter of 2018.

There’s no indication that the unofficial suspension of the larger Qualified Domestic Institutional Investor (QDII) scheme, which allows Chinese investors to buy overseas stocks and bonds, is being lifted.

Resumption of QDLP quotas would indicate Beijing is increasingly confident about pressing ahead with financial deregulation as its fears of capital outflows and yuan depreciation have receded.

The move to reopen the gates for QDLP comes at a time global financial markets have rallied robustly.

The Shanghai Municipal Financial Service Office and the State Administration of Foreign Exchange (SAFE), China’s forex regulator, did not respond to requests for comment.

Domestic media have quoted foreign institutions such as BNP Paribas Asset Management, British asset manager Aberdeen Standard, and South Korea’s Mirae Asset as saying that they are interested in getting QDLP licenses.

Dutch money manager Robeco has also said it was seeking a QDLP license.

The last batch of QDLP licenses was granted in late 2015. The scheme was launched in 2013.

Under QDLP, foreign asset managers, via their China subsidiaries, can raise funds from wealthy Chinese individuals within a set quota, and invest the money in a broad range of assets overseas, including hedge funds and distressed debts. (Reporting by Samuel Shen and Sumeet Chatterjee; Editing by Richard Borsuk)

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