中伦观点 | Fundraising from China for Offshore Assets

为适应国际化经济发展，积极开展跨境财富管理，满足国内投资者境外投资需求，上海、天津、重庆、青岛、深圳等地相继出台相关法规，逐步开展试点合格境内有限合伙人（Qualified Domestic Limited Partnership，简称QDLP）、合格境内投资企业（Qualified Domestic Investment Enterprise，简称QDIE）项目，允许投资者将境内募集的资金投到境外市场，从而创造境外投资的新型通道。

Traditionally, it has been difficult for offshore fund manager or offshore venture capital to conduct fundraising in China, due to China’s foreign exchange control. The Qualified Domestic Institutional Investor (“QDII”) program, which was established in around 2006 and was commonly considered being restricted to the needs of retail investors. However, various local governments started to relax restrictions on RMB foreign investment by launching pilot alternatives in the following years. In 2013, Shanghai launched the Qualified Domestic Limited Partner (“QDLP”) program, followed by other cities like Tianjin, Chongqing, Qingdao, Shenzhen, notably the Qualified Domestic Investment Enterprises (“QDIE”) issued by Shenzhen.
Both QDLP and QDIE require the formation of an onshore fund in one of the pilot cities, with the form of a company, a limited partnership, or a contractual fund. The fund will have an onshore fund manager and/or general partner in the form of a foreign-invested partnership enterprise or a wholly foreign-owned enterprise. Such onshore fund will then become an investor in one or more offshore funds affiliated with the offshore fund manager. Additionally, both QDLP and QDIE must engage a qualified domestic commercial bank as its custodian to safekeep its onshore assets, and also engage a qualified administrator to be responsible for the back-office administration.
There are several differences between QDLP and QDIE, including but not limited to the following: 

1Permissible Investment Scope – Shenzhen QDIE program is permitted to invested more broadly while Shanghai QDLP program is restricted to offshore public market only.  

2Eligible Participants - Under Shenzhen QDIE program, the eligible participants can be either foreign-invested or pure domestically-funded companies, while under Shanghai QDLP program, primarily the qualified foreign-funded managers/companies are eligible to participate; and

3Capital requirements on the onshore manager - The minimum registered capital for foreign-invested manager is US$2 million and RMB 10 million for the domestically-funded companies under Shenzhen QDIE program, while it is US$2 million while under Shanghai QDLP program.  

To be approved as an onshore feeder, a joint committee or working group composed of various local regulators is involved in the approval process. Once approved, each onshore feeder will be officially granted a foreign currency quota and may apply for an additional quota as needed. The onshore feeder will then accept subscription in RMB from Chinese investors, which can be converted into US dollars for investing into one or more offshore funds without additional approvals.
It should be noted that the applicable QDLP/QDIE rules containing disclosure requirements and ongoing reporting requirements, together with the relevant rules concerning private funds, such as the requirements to private placement, investor suitability and ongoing filing/reporting would be applied to the onshore fund, the fund manager and the service providers.
It is anticipated that more liberated programs, including upgraded QDII, will be issued to facilitate offshore investment by Chinese individuals. 

The information contained in this article is only intended to be a synopsis.  It is advisable to take detailed professional advice before acting on it.  If you would like to find out more about how Zhong Lun can assist you, please contact Kent WOO at [e-mail] or [phone]

作者简介：

吴清发 律师中伦律师事务所 非权益合伙人 

业务领域：公司/外商直接投资，争议解决，知识产权

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