Qianhai Launches Qualified Foreign Limited Partner Pilot Program

March 7, 2013 Posted by China Briefing Reading Time: 3 minutes

Mar. 7 – In the “Official Reply on Policies Concerning the Development and Opening-up of the Qianhai Shenzhen-Hong Kong Modern Services Cooperation Zone (hereinafter referred to as the ‘Reply’)” released by China’s State Council on June 27, 2012, Qianhai has been chosen as the experimental and demonstrative window for the opening-up of China’s financial sector. The Reply encourages Qianhai to implement various advanced pilot policies – one of them is to support the innovative development of foreign-invested equity investment funds in the area.

In response, Shenzhen’s Financial Service Office released the “Interim Measures on Launching the Pilot Program for Foreign-invested Equity Investment Enterprises in Shenzhen (shenfujinfa [2012] No.12, hereinafter referred to as the ‘Measures’)” in December last year, which designates Qianhai as the first area in Shenzhen to pilot the Qualified Foreign Limited Partner Pilot Program (QFLP Pilot Program).

On March 4, 2013, another circular named the “Operating Rules on the Pilot Program for Foreign-invested Equity Investment Enterprises in Shenzhen (shenfujinfa [2013] No.3, hereinafter referred to as the ‘Rules’)” has been issued, which provides detailed information on the application requirements and approval procedures for the QFLP Pilot Program.

According to Xiao Zhijia, Head of Shenzhen Financial Services Office, foreign-invested equity investment enterprises included under the pilot program are entitled to the preferential policies implemented in both Shenzhen and Qianhai Shenzhen-Hong Kong Modern Services Cooperation Zone.

Detailed information of the Measures and the Rules can be found below.

Establishing Requirements

Capital Contributions

For a foreign-invested equity investment enterprise, the subscribed capital contribution shall be no less than US$15 million or equivalent value in other currencies, and shall be made in cash only.
For a foreign-invested equity investment management enterprise, the registered capital (or subscribed capital contribution) shall be no less than US$2 million or equivalent value in other currencies, and shall be made in cash only.

Senior Management Person

For a foreign-invested equity investment management enterprise, it shall have at least two senior management persons who:

Have more than five years practical experience in equity investment or equity investment management activities
Have more than two years experience in senior management duties
Have experience in the practice of China-related equity investment or practical experience in a financial institution in China
Have no record of violating Chinese laws or regulations, nor pending economic dispute lawsuits in the last five years
Have a good personal credit record

For a foreign investor applying for the pilot program, the following conditions must be satisfied:

The foreign investor should have a sound governance structure and a comprehensive internal control system; and has not been penalized by judicial authorities and relevant supervisory authorities in the last two years
The foreign investor or its affiliated entities shall have relevant investment experience
The foreign investor shall be primarily formed by foreign sovereign wealth funds, retirement funds, endowment funds, charity funds, fund of funds (FOF), insurance companies, banks or securities companies

The Rule provides more detailed requirements for a foreign investor to be included under the pilot program, it shall meet at least one of the following conditions:

The foreign investor’s assets shall be worth no less than US$100 million, or the assets managed by it shall be worth no less than US$200 million in the fiscal year prior to the application
The foreign investor shall hold the asset management license issued by the Hong Kong Securities Regulatory Commission
The foreign investor shall be a world-renowned equity investment institution (within the Top 100 Asset Management List)

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