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Japan's SMBC assigned yuan investment quota

Foreign-investor scheme to help grow its mainland bond business

China agreed to grant Japanese financial institutions yuan investment quotas as relations improved last year.   © Reuters

SHANGHAI -- Sumitomo Mitsui Banking Corp. is the first Japanese financial institution to receive a yuan-denominated quota for investing in Chinese securities as it expands its bond business on the mainland.

The bank was granted a 3 billion yuan ($438 million) quota for the Renminbi Qualified Foreign Institutional Investor program late last year. Although foreign investors can trade mainland bonds through the Hong Kong's Bond Connect platform, the RQFII program enables purchasing of a wider variety of securities, such as publicly traded bonds.

SMBC will mainly make its own bond investments but also plans to introduce opportunities to other foreign investors. It aims to build up expertise and experience in anticipation of further liberalization in Chinese financial markets.

The RQFII scheme was established in 2011. But it was not extended to Japan for years as bilateral relations soured. Chinese Premier Li Keqiang announced a 200 billion yuan quota for Japan during his trip there last May.

SMBC is a unit of Sumitomo Mitsui Financial Group.

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