QFII and QDII requirements
Can money be raised outside of China (i.e., non-RMB currency) by a non-Chinese entity for purposes of investing in China’s capital markets?
Only a Qualified Foreign Institutional Investor (“QFII”) may convert non-RMB currency into renminbi (“RMB”) for purposes of investing in China’s capital markets. A non-Chinese financial institution may become a QFII if it satisfies the following criteria: (i) it is financially sound and has good credit, has managers with at least five years of fund management experience, has at least US$10 billion in assets under management and has appropriate internal risk controls and procedures in place; (ii) its employees have the appropriate professional qualifications/designations that are required in the entity’s home country; (iii) it has not received any substantial penalties from the regulators in its home country within the last three years; (iv) its home country has a sound legal and regulatory system and its securities body has signed a memorandum of understanding with the China Securities and Regulatory Commission (“CSRC”) and (v) it satisfies other criteria established by the CSRC from time to time.
Can money be raised in China (i.e., RMB) by a non-Chinese entity for purposes of investing in capital markets outside of China?
Only a Qualified Domestic Institutional Investor (“QDII”) may convert RMB into a non-RMB currency for purposes of investing in overseas markets. Only Chinese banks, securities-related institutions (e.g., fund management companies and securities companies) and insurance companies may apply for QDII status. A Chinese securities-related institution may use a non-Chinese investment adviser to manage assets, if the investment adviser satisfies the following criteria: (i) its managers have at least five years of fund management experience, (ii) it has at least US$10 billion in assets under management, and (iii) it is organized and regulated in a jurisdiction that has entered into a memorandum of understanding with the CSRC. However, a non-Chinese investment adviser may be able to raise funds from the Chinese domestic market by entering into a joint venture with, or having a minority stake in, a QDII.