China grants €6.89bn investment quota to Ireland

RQFII programme allows foreign institutions to invest in Chinese capital markets

Ireland is the 18th jurisdiction granted access to China’s capital markets under what are seen as the more flexible of the country’s two main licences for foreign institutional investors.

Ireland is the 18th jurisdiction granted access to China’s capital markets under what are seen as the more flexible of the country’s two main licences for foreign institutional investors.

 

China has given Ireland an investment quota worth 50 billion yuan (€6.89 billion) under the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme, the People’s Bank of China announced in Beijing on Wednesday.

Launched in 2011, RQFII is a programme under which overseas institutions can use China’s yuan currency (also referred to as the renminbi) raised offshore to invest directly in mainland China, including shares, bonds and money market investments.

The news makes Ireland the 18th jurisdiction granted access to China’s capital markets under what are seen as the more flexible of the country’s two main licences for foreign institutional investors. Other countries include Britain, France, Germany and South Korea.

The Minister for Finance, Michael Noonan, welcomed the move. “The fact the People’s Bank of China has generously granted Ireland this quota highlights the important role Ireland plays in international financial services,” he said.

In June, China granted the US a 250 billion yuan (€24 billion) quota under the programme. Hong Kong has the largest RQFII quota at 270 billion yuan (€37.4 billion). The licences are granted approval by the China Securities Regulatory Commission.

RQFII is considered much less restrictive than the Qualified Foreign Institutional Investor platform, where investors must allocate at least half of their quota to equities (A shares).

Reform efforts

Chinese financial authorities are trying to boost the use of the yuan internationally as part of broader effort by the government of president Xi Jinping to reform the economy.

The move is part of intensified efforts by China to liberalise its capital markets. Foreign interest has flagged after the near-collapse of the equity markets in summer 2015 and the accompanying heavy-handed official intervention to prop up the share markets. A sudden devaluation of the currency in August 2015 also caused a setback.

The announcement comes after confirmation that the Irish Central Bank is allowed to accept applications from Irish domiciled UCITS and AIFs to invest through the Shenzhen-Hong Kong Stock Connect programme, known as Shenzhen Connect.

“We believe that multiple access points to the Chinese securities markets via RQFII and Stock Connect provide a range of options for the hundreds of investment managers who already use Ireland and the many more we believe will,” said Pat Lardner, chief executive of Irish Funds, the representative body for the cross-Border investment funds industry.

Ireland is currently the world’s third largest global funds centre, and Mr Lardner said the move bolsters that position.

“As the home of 4.9 per cent of global fund assets and 14.6 per cent of European fund assets, Ireland will continue to provide vital connections between managers and investors from around the globe,” he said.

Closer co-operation

The Minister of State for Financial Services, Eoghan Murphy,called the investment quota an important step in building closer bilateral co-operation with China in financial services.

“While given the uncertainty arising from the Brexit vote,” he said, “it has become more of an imperative for Ireland to continually improve the conditions to attract new investment and job creation in this sector.”

Mr Murphy will travel to Beijing and Hong Kong next month to take part in the Asian Financial Forum.