The People's Bank of China has released guidelines that will regulate RMB-linked investment activity in the country after giving its approval in December to launch pilot programs for these products.

The government has supported efforts to disseminate RMB-linked investment activity both on and offshore in a bid to funnel more investment back into Chinese soil and strengthen the case of the Renminbi to become an international currency. 

Details of the pilot program for RMB-qualified foreign institutional investors were reported here previously. In a joint statement by Chinese regulatory bodies, subsidiaries of fund management and securities firms are now allowed to use Hong Kong-raised RMB funds to invest in the Mainland provided they follow a pre-set quota and adhere to guidelines. 

The guidelines include requiring overseas firms under the RQFII scheme to open their basic and special deposit accounts in a Chinese commercial bank qualified to act as a QFII custodian. In addition, participants must create a separate deposit account for each open-ended fund and should not open a general deposit or even a temporary account for cash payments. Pilot institutions can also open three kinds of special accounts and capital may be transferred between these three accounts.