The year 2010 saw what was arguably the first “Big Bang” event for RMB internationalisation. This happened when Hong Kong signed a clearing amendment agreement with Mainland China under which all corporates and institutions from anywhere in the world could open RMB bank accounts in Hong Kong, and funds in RMB bank accounts became freely transferrable. Hong Kong quickly experienced a flourishing of first-in-the-world offshore RMB investment products – RMB mutual funds, and listed RMB equities and funds. The following year, Hong Kong worked closely with Mainland China to create a new innovation – the RMB Qualified Foreign Institutional Investors programme (RQFII).
The concept of the RQFII is quite simple. It is, at its core, a QFII quota, which China has been giving foreign banks and investors since 2002, allowing them to directly invest in China’s securities market. Unlike the QFII, the RQFII quota is denominated in RMB. The key innovation behind the RQFII is that it uses the Hong Kong asset management platform to successfully connect offshore RMB liquidity with the onshore securities market. Riding on the back of the RQFII, Hong Kong rapidly developed a wide range of RMB investment products.