Malta’s Financial Services Authority (MFSA) has announced the signing of a Memorandum of Understanding with the China Securities Regulatory Commission (CSRC), and has disclosed that it plans to sign an additional agreement that will significantly increase access to the Chinese market.
The agreement was signed in Malta by Joe Bannister, Chairman of the MFSA, and Shang Fulin, Chairman of the CSRC, during a short ceremony presided by Malta’s Finance Minister, Tonio Fenech. The CSRC is the state agency of the Securities Policy Committee of the State Council of the People’s Republic of China and is responsible for the supervision and regulation of national securities and futures markets in the China.
The signing of the MoU is the result of negotiations that started in 2008, and places Malta’s funds industry at the same level with the major fund domiciles particularly in the European Union. It will most importantly facilitate business for financial institutions doing business between the two countries.
A similar agreement with the China Banking Regulatory Commission is expected to be signed shortly. As a result of the signing of the MoU, Chinese Qualified Domestic Institutional Investors will be able to invest on behalf of Chinese investors into Malta domiciled investment funds (Professional Investor Funds and UCITS funds) regulated by the MFSA, thereby opening up MFSA regulated funds to one of the world's largest pools of private capital. The QDII scheme permits Chinese domiciled investors to invest in foreign securities markets via certain fund management institutions, insurance companies, securities companies and other asset management institutions which have been approved by the CSRC as QDIIs.
Under the QDII scheme, introduced in June 2006, Chinese domiciled institutions and residents invest with Chinese commercial banks and these entities then invest in overseas financial products. The stocks or investment funds in which a QDII invests must be listed on a stock exchange or regulated by a regulatory authority that has signed a MoU with the CSRC.
According to the MFSA, companies licensed by the Authority will also be able to access the Chinese Qualified Foreign Institutional Investor (QFII) status and invest directly in China. The QFII scheme permits qualified foreign investors to invest in the China A share market under certain foreign exchange flow and disclosure requirements. The financial institutions that are permitted to apply to be a QFII include fund management companies, insurance companies, securities firms and commercial banks with qualifications prescribed by the CSRC and the other relevant regulators. Upon the approval by the CSRC, a QFII is granted an investment quota by the State Administration of Foreign Exchange and, after selecting a Chinese custodian bank and one or more local brokers, may place orders to buy and sell stock in the China A share market. The investment scope of a QFII extends to treasury bonds, convertible bonds, corporate bonds, warrants and other financial products approved by the CSRC.
The Maltese government has noted that the signing of the MOU is an important development for the island’s financial services sector. It will provide a huge benefit for the funds industry and will be an important factor for promoters selecting Malta to domicile their funds.
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