The "Double Q" policy QFLP and QDLP is known as the "two-way highway for cross-border investment". As one of the important and new cross-border investment paths in Hainan's free trade port, the introduction of Hainan's QFLP and QDLP policies has ignited market enthusiasm and attracted a large number of private equity firms to set up in Hainan.

What are the features and advantages of Hainan's "Double Q" policy compared to other pilot regions in China? What can the "Double Q" policy bring to Hainan's free trade port? Let's find out together.

QFLP is registered in the domestic fund managers through certain regulatory procedures, in a non-public way to raise foreign investor funds, invested in the domestic PE (Private Equity) and VC (Venture Capital) market.

Hainan QFLP policy is to allow foreign eligible investors to collect money together through the establishment of funds in Hainan free trade port in the form of equity investment, venture capital, etc. As a new form of cross-border investment, which can broaden the domestic investment channels, more flexible introduction of foreign capital helps the construction of Hainan Free Trade Port.

Hainan QFLP policy features:

1. Easy and efficient registration, no joint examination mechanism. The application process for QFLP enterprises is relatively short and requires fewer materials to be submitted.

2. Implementation of negative list management for foreign investment.

3. Zero threshold, with the lowest entry requirements in China.

4. No difference, the requirements for domestic and foreign QFLP management enterprises are the same.

5. More preferences, from personal income tax, supporting preferential measures and park landing incentives, etc. And will actively promote QFLP business into Hainan Free Trade Port encouraged industrial directory and encouraged foreign investment industry directory, so that QFLP enterprises will enjoy more tax incentives.

Policy convenience:

1. No joint examination mechanism, and you can register with the industry and commerce department after obtaining the recommendation letter issued by the relevant functional departments of Hainan Province, the municipal and county people's governments, etc.

2. Compared with foreign-invested companies, the organizational form is more flexible and convenient, and can take the form of company or partnership.

3. Clearly allow the business model of "domestic capital managing foreign capital" and "foreign capital managing domestic capital".

4. Specify the establishment of Hainan QFLP fund management enterprises and Hainan QFLP fund registration does not set a minimum entry threshold.

A pioneering venture:

Hainan Tianlong Private Equity Investment Fund Management Co., Ltd., which is wholly foreign-owned, will issue a fund product - Tianlong Xinzhi Ziqiang Fund at the end of July 2021, becoming the first QFLP fund management company and QFLP fund "double landing" enterprise in Hainan Free Trade Port.

Lv Qiteng, chairman and founding partner of the company, said that two QFLP funds have been issued with a total of US$100 million. At present, there are several QFLP funds of about US$200 million that will be issued this year. The funds are mainly invested in the new generation of domestic information technology, digital economy, new economic fields such as semiconductors and new energy.

By the end of May, 67 QFLP funds had landed in Hainan, with a total registered capital of $7.04 billion, and a total of 19 QFLP fund management companies had settled in Hainan, with a total registered capital of $440 million.

QDLP refers to a pilot fund management enterprise which, after passing the qualification approval and obtaining the quota, can raise funds from domestic qualified investors and invest them in equity and bonds of overseas unlisted enterprises, stocks and bonds of overseas listed enterprises which are not publicly issued and traded, overseas securities market, overseas equity investment funds and securities investment funds and overseas commodities through the establishment of a pilot fund.

The QDLP policy and the QFLP (Qualified Foreign Limited Partner) policy mentioned above are like a pair of "QDLPs".

The QDLP policy and the QFLP (Qualified Foreign Limited Partner) policy mentioned above are like a pair of "blood brothers".

Simply put, QFLP is the foreign capital to the territory, and QDLP policy is to facilitate the domestic capital to invest abroad, and the two policies in Hainan at the same time pilot, will increase the convenience of cross-border investment in Hainan, to attract the fund industry in Hainan agglomeration.

QDLP can participate in the establishment of the pilot fund management enterprise in Hainan, launched in accordance with the law, in a non-public manner to raise funds from investors, so as to make overseas investments. QDLP can broaden the channels of overseas investment, facilitate the global asset allocation of domestic investors, and open up new channels for domestic high net worth individuals to make overseas investments and cross-border wealth management.

In China, the QDLP policy is still in the pilot stage, except for Hainan Free Trade Port, only a few regions such as Guangdong, Shanghai and Chongqing enjoy this convenience. Compared to the QDLP system in other regions, Hainan's QDLP system further relaxes the threshold requirements such as minimum capital contribution and capital contribution time, and instead focuses more on the internal control management of QDLP fund management enterprises, related party qualifications and other substantive requirements.

Hainan QFLP policy features:

1. Low threshold. The registered capital of the pilot fund management enterprise is not less than RMB 5 million or the equivalent in foreign currency.

2. Broader investment scope. Including: equity and bonds of overseas non-listed enterprises, equity and bonds of overseas listed enterprises, overseas securities market, overseas commodities, etc.

3. More flexible. The foreign investment quota is managed by balance and the fund manager can flexibly transfer the foreign investment quota of a single pilot fund among the funds it has established, and the sum of the foreign investment quota of each pilot fund shall not exceed the approved foreign investment quota of the pilot fund management enterprise.

On August 23, 2021, Hainan QDLP fund manager “Hainan Ping An Private Equity Fund Management Co., Ltd.” launched the establishment of the first QDLP fund in Hainan Free Trade Port, with a fund size of more than RMB 400 million, marking the official landing of Hainan QDLP and the opening of the “cross-border two-way investment mechanism” built by Hainan Free Trade Port.

Up to now, 37 fund management companies have been qualified for Hainan QDLP pilot and the pilot quota.

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Source(s): OA-Hainan Free Trade Port