Q: What approval procedures are needed to set up a QFLP?

A: Foreign applicants looking to set up a QFLP must adhere to The Measures for Administration of the Establishment of Partnership Enterprises Within the Territory of China by Foreign Enterprises or Individuals and The Provisions on the Registration of Foreign-funded Partnership Enterprises. Approval procedures are as follows:

(1) Submit application documents to the Shanghai Office for Advancing International Financial Center Development;

(2) Obtain approval from the joint meeting;

(3) Apply to the Shanghai Municipal Administration for Market Supervision for setting up the entity;

(4) Apply for the formal approval letter of the QFLP license and foreign exchange quota;

(5) Complete registration with the Shanghai branch of the State Administration of Foreign Exchange, including all relevant registration documents.

Q: How do companies apply for the QFLP pilot program? What qualifications are required for applicants and foreign investors?

A: QFLPs and foreign equity investment management companies participating in the pilot program should submit applications to the Shanghai Office for Advancing International Financial Center Development through an executive partner. The partner must have more than three years' good experience in investment practice in China. Foreign investors applying for the pilot program must meet the following requirement:

(1) In the fiscal year previous to the application, the investor's equity capital size should be no lower than US$500 million or AUM no lower than US$1 billion;

(2) The investor should have a sound management structure and internal control system, and must not been punished by judicial departments or regulators in the past two years;

(3) Foreign investor or its related entity should have more than five years of relevant investment experience;

(4) Other requirements as stipulated by the joint conference.

Q: What's the difference between setting up a QFLP and applying for the QFLP pilot program?

A: Setting up a QFLP is different from applying to participate in the QFLP pilot program. Only QFLPs approved to participate in the trial can use foreign currencies for domestic equity investment.

Q: How do companies apply for foreign currency conversion?

A: Pilot companies should convert currencies at a custodian bank and comply with principles of conversion based on real needs, balance management, and risk notification.

Q: How do pilot companies make domestic investments?

A: QFLPs making domestic investments should comply with relevant laws, administrative rules, and regulations applicable to foreign investment. Those regarded as foreign investors should abide by the procedures of foreign investment companies making domestic investment.

Q: Are there industrial restrictions when pilot companies make an investment?

A: QFLPs are not allowed to invest in the following businesses:

(1) Sectors where foreign investment is forbidden by the country;

(2) Trade in the secondary stock and bond market, except for the stake QFLP holds after a company it invests in goes public;

(3) Trade of financial derivatives such as futures;

(4) Directly or indirectly invest in non-self-use properties;

(5) Use non-equity-capital for investment;

(6) Offer lending or guarantee for others;

(7) Other activities QFLPs are forbidden from participating in, stipulated by laws, rules and relevant documents.

Q: Can pilot companies use yuan-denominated returns to make other domestic investment?

A: QFLPs in the pilot program can use yuan-denominated returns to invest in new domestic projects.

Q: When a pilot company exits from an investment program, how will the investment returns be transferred to a foreign investor?

A: QFLPs transferring realized accumulated profits or capital should obtain an audit report issued by registered public accountants in China, submit applications, and transfer the exchange from the custodian bank. The custodian bank should complete transfer procedures in accordance with laws and regulations after receiving all required documents.