Foreign hedge funds could raise RMB capital

Global hedge funds may soon be able to raise renminbi-denominated funds in China, provided they register the fund in Shanghai and invest only in markets outside the mainland, the South China Morning Post reported, citing people familiar with the matter. The Shanghai Municipal Office of Finance Service has received guidelines from national regulators that would allow foreign asset management funds to establish RMB funds. Foreign firms already can establish private equity funds, though the investments must be made in China. “The government sees this as a win-win deal,” said a fund industry executive. The government “wants to reduce the size of its huge foreign-exchange reserves, which have become more and more difficult to manage,” he said. “For Western hedge funds, they will find ample capital on the mainland for them to pitch and get.”