With the purpose of deepening interconnection between domestic and overseas financial markets and guiding orderly development of Qualified Foreign Limited Partnership enterprises, agreed by the People’s Government of Dongguan Municipality, Dongguan Municipal Financial Bureau printed and distributed “Dongguan’s Interim Measures for Management of Pilots of Qualified Foreign Limited Partnership” (hereinafter referred to as “Interim Measures”) on August 13. This signified the official implementation of Qualified Foreign Limited Partnership pilots in Dongguan.
Expanding channels for introducing foreign investment and empowering development of emerging industries
According to the fourth measure of the “Interim Measures”, QFLP management enterprises are allowed to establish or be entrusted to manage private equity and venture capital investment fund in China. Domestically-invested private equity, venture capital fund management companies can establish or be entrusted to manage QFLP enterprises.
Qualified Foreign Limited Partnership (QFLP) refers to enterprises jointly invested and established by foreign natural persons, enterprises or other organizations who raise funds from investors in a non-open manner and carry out equity investment activities in the investment destination to seek benefits for the investors. QFLP is an important channel for foreign investors to participate in investment in China, including QFLP management enterprises and QFLP investment enterprises.
The launch of the “Interim Measures” will attract convergence of equity investment enterprises with global influence, which will have profound implications for nurturing of strategic emerging industries in Dongguan with utilization of foreign investment and for promoting transformation and upgrading of Dongguan’s industries and development of high-tech industries.
Relaxing threshold for access with more flexible organization structure
It is clearly indicated in the “Interim Measures” that national treatment is granted to both domestic and foreign investment based on the development trend and current management practice of the QFLP pilot work. First, threshold for access will be lowered. Aside from legal and regulation requirements related to foreign investment and private equity fund management, additional restrictions such as registered capital, proportions of initial capital contribution and fulfillment periods of capital contribution will not be imposed on QFLP enterprises. Second, range of investment will be expanded. QFLP enterprises are allowed to make private equity investment within the range and subject matter in China Securities Regulatory Commission and Asset Management Association of China, including primary market transactions such as equity of non-listed companies and private replacement and agreed transfer of listed companies. Moreover, investment in domestic private equity and venture capital fund is allowed via the mode of Funds of Funds (FOF). Third, flexible organization structure will be adopted. In addition to the traditional pattern of “foreign investment managing foreign investment”, QFLP management enterprises are allowed to establish or be entrusted to manage private equity and venture capital investment fund in China. Domestically-invested private equity, venture capital fund management companies can establish or be entrusted to manage QFLP enterprises. Simply put, “foreign investment managing domestic investment” and “domestic investment managing foreign investment” are allowed.
Establishing mechanism for joint consultation meetings and promoting convergence of capital factors
According to the “Interim Measures”, pilot qualification should be obtained from the industrial parks and financial departments of the towns or sub-districts. Enterprises meeting pilot requirements can obtain certification from Dongguan’s joint consultation meetings work mechanism organization. Dongguan Municipal Financial Bureau will work with departments such as Dongguan Development & Reform Bureau, the Bureau of Commerce of Dongguan City, Dongguan Administration for Market Regulation, the People’s Bank of China Dongguan City Sub-branch (State Administration of Foreign Exchange Dongguan Center Branch) and Dongguan Investment Promotion Bureau to establish pilot work joint consultation meetings mechanism, taking charge of review and approval of pilot business, filing of credit and daily supervision and management.
QFLP enterprises settled in Dongguan can equally enjoy Dongguan’s reward policies for promoting development of equity investment fund industry. QFLP enterprises settled in Dongguan can enjoy maximum reward of ten million yuan for settlement and QFLP management enterprises can receive maximum rent subsidy of one million yuan for self-use office rooms. Professionals working for QFLP meeting Dongguan’s certification standards for characteristic talents and industry innovative talents are entitled to favorable policies such as reward for tax contribution, household registration for talents, housing and medical subsidies, school admittance of the accompanying children and placement for the accompanying spouse.
Written by Liu Guiping
