China has approved an application to launch the country's first exchange-traded fund with a link to Hong Kong's Hang Seng China Enterprise Index. 

E Fund Management, a Chinese fund management firm, is now allowed to sell ETFs under the renminbi qualified domestic institutional investors program, which enables selected Chinese firms to use onshore-raised local currency to purchase overseas-listed securities within a specified limit. It is regulated by the China Securities Regulatory Commission.

The launch addresses the growing demand among Chinese investors for assets in better-regulated international capital markets and highlights Beijing's efforts to cement Hong Kong's status as a global financial hub. It is also said to be preparing for the imminent launch of cross-border exchange-traded funds in the next months.

China unveiled the RQFII pilot program in December 2011 and selected nine Chinese fund management firms to apply for individual quotas under a collective initial investment cap of RMB20 billion ($3.1 billion).