(China Alert) Outbound flows: More volume, better programs

·QDII2 and RQDII are the next steps in outbound investment
·The programs are both complements and upgrades to QDII
·Real opportunities for foreign managers are being created

Update: While attention has been focused on Xi’s visit to the UK, and the warm glow arising from trade agreements, Z-Ben Advisors has been surprised to see a number of meaningful and potentially lucrative cross-border reforms emerge at home. Three relatively dormant programs, the FTZ, QDII2 and RQDII, have been jumpstarted in the last few weeks. Two – the FTZ and QDII2 – have been combined to their mutual benefit, which opens a huge door for foreign managers to market products directly to Chinese HNWIs. Meanwhile, RQDII is beginning to look like RQFII’s onshore mirror. CSRC’s off-and-on support for outbound flows is now firmly on and changes at the top indicate that this shift in emphasis will be lasting.

QDII2 is a program which allows onshore HNWIs to use the Free Trade Account (FTA) system in the Shanghai FTZ to move assets to offshore markets at the discretion of the investor. No formal per-investor quota system for QDII2 has been announced, but Z-Ben Advisors believes……

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