A second fund manager joins China's Hainan QFLP quota pilot, signaling growing momentum for foreign private equity participation.

Hainan, China's southern free trade port, has taken a significant step toward liberalizing inbound investment. On July 2, 2025, authorities confirmed the expansion of its Qualified Foreign Limited Partner (QFLP) quota management pilot program, with Hainan Yuanfeng Private Fund Management Co., Ltd. officially added to the scheme. This marks the second QFLP quota-managed entity approved in the province.

Yuanfeng is affiliated with CPE Yuanfeng, an international asset management firm with a strong track record across global markets and deep expertise in China. Its Hainan-based fund management arm will now benefit from the province's evolving regulatory framework aimed at attracting long-term foreign capital.

What Makes Hainan's QFLP Quota Pilot Different?

Unlike traditional project-by-project QFLP approvals, Hainan's quota management modelfocuses on allocating quotas directly to fund managers. Once approved, managers can freely establish QFLP funds within the quota limit and move funds in and out of China without seeking separate currency conversion or capital registration approvals for each fund or investee company.

Key advantages include:

No need for individual FX capital account registrations

Direct inbound/outbound remittance within quota limits

Simplified capital increase/reduction process

Streamlined foreign exchange procedures with only a tax commitment letter required for outbound transfers

These innovations remove several bureaucratic bottlenecks often faced by foreign PE/VC investors entering China, particularly in non-traditional financial centres.

First QFLP Fund Landed in 2023

The pilot was formally initiated in Yuanpu Economic Development Zone, a core reform zone in Hainan's Free Trade Port. In September 2023, Hainan Tiankun Xiangheng Private Equity Fund became the first QFLP fundunder the new quota system to complete its business registration.

Under the policy, fund managers must appoint a qualified domestic custodian bankto independently monitor fund flows in real time. This strengthens investor protection and regulatory transparency, while aligning with international best practices.

Strategic Goal: A National Gateway for Foreign Capital

Launched by Hainan's Financial Supervisory Authority, the QFLP quota mechanism is part of a broader agenda to:

Enhance capital account openness

Facilitate trade and investment liberalization

Position Hainan as a portal for foreign investment into China

By piloting QFLP quota reform in Hainan and expanding it gradually, China is testing new ways to build a high-level cross-border investment ecosystemunder real-world conditions, with a clear ambition to scale successful reforms nationwide.

Why It Matters for Foreign Asset Managers

Hainan's approach offers a unique entry point for foreign private equity, venture capital, and family offices looking to deploy capital in China under more predictable and flexible conditions.

Compared with major financial hubs like Beijing or Shanghai, Hainan's free trade policies may offer:

Faster fund setup timelines

Less restrictive foreign exchange control

Clearer tax and fund repatriation pathways

As China continues to explore tiered liberalization through regional pilots, Hainan's QFLP reform could serve as a bellwether for future national policy—especially for foreign GPs seeking smoother access to China's domestic capital and deal pipelines.