Q: When a company in the trial program exits from an investment program, how will the investment returns be transferred to a foreign investor?
A: QFLPs transferring realized accumulated profits or capital should acquire an audit report issued by registered public accountants in China, submit applications, and transfer the exchange from the custodian bank. The custodian bank should complete transfer procedures according to laws and regulations after receiving all required documents.
Q: Can companies in the trial program use yuan-denominated returns to make other domestic investment?
A: Quotas used by QDLPs in the trial can only be used in a single round of investment. In principle, companies can not invest in new projects once the quota is used up.
Q: Are there industrial restrictions when companies in the trial program make an investment?
A: QFLPs must not participate in the following businesses:
(1) Sectors where foreign investment is forbidden by the country;
(2) Trade in the secondary stock and bond market, except for the stake QDLP holds after a company it invests goes public;
(3) Trade of financial derivatives such as futures;
(4) Directly or indirectly invest in non self-use properties;
(5) Use non equity-capital for investment;
(6) Offer lending or guarantee for others;
(7) Other events QDLPs are forbidden from participating, stipulated by laws, rules and relevant documents.
Q: How do companies in the trial make domestic investment?
A: QFLPs making domestic investment should comply with relevant laws, administrative rules, and regulations applicable to foreign investment. Those regarded as foreign investors should abide by the procedures of foreign investment companies making domestic investment.
Q: How do companies apply for foreign currency conversion?
A: Companies participating in the trial should convert currencies at a custodian bank, and should comply with principles of conversion from real needs, balance management, and risk notification. Under special circumstances can companies convert in their original banks, and the moves are subject to case-by-case approval by the joint conference.
Q: What’s the difference between setting up a QFLP and applying for QFLP trial?
A: Applying for setting up a QFLP is different from applying for participating in the QFLP trial. So far, only those QFLPs that are approved to participate in the trial are allowed to use foreign currencies for domestic equity investment.
Q: How do companies apply for the QFLP trial? What qualifications are required for applicants and foreign investors?
A: QFLP and foreign equity investment management companies participating in the trial should submit trial applications to Shanghai Financial Services Office through an executive partner. The partner must have more than 3 years’ good experience in investment practice in China.
Foreign investors applying for the trial must meet the following requirement:
(1) In the fiscal year previous to the application, the investor’s equity capital size should be no lower than US$500 million or AUM no lower than US$1 billion;
(2) The investor should have a sound management structure and inner control system, and has not been punished by judicial departments or regulators in the past 2 years;
(3) Foreign investor or its related entity should have more than 5 years of relevant investment experience;
(4) Other requirements by the joint conference.
Q: What approval procedures are needed to set up a Qualified Foreign Limited Partner (QFLP)?
A: Foreign applicants for setting up a QFLP must comply with The Measures for Administration of the Establishment of Partnership Enterprises Within the Territory of China by Foreign Enterprises or Individuals and The Provisions on the Registration of Foreign-funded Partnership Enterprises. Approval procedures are as follows:
(1) Company name verification by Shanghai Industrial and Commercial Bureau: Applicants submit company name materials to Shanghai Industrial and Commercial Bureau office
(2) Registration with Shanghai Industrial and Commercial Bureau: Applicants submit company set-up materials to the Shanghai Industrial and Commercial Bureau office
(3) Inspection by Shanghai Financial Services Office: Shanghai Industrial and Commercial Bureau seeks opinions from the Shanghai Financial Services Office with regard to setting up the company
(4) Registration with Shanghai branch of the State Administration of Foreign Exchange: company complete registration procedures with relevant registration documents.