SHANGHAI/HONG KONG - The Chinese mainland plans to introduce a program "as soon as possible" to let its financial companies in Hong Kong start yuan funds that will invest in mainland stocks, according to an official at the securities regulator.

The plan forms part of a mini-Qualified Foreign Institutional Investor (QFII) program, said Wang Lin, director-general of the department of fund supervision at the China Securities Regulatory Commission.

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"By now, the relevant systems have taken shape," Wang said in Hong Kong on Friday. "We are working with other agencies on refining them and introducing the service as soon as possible."

China allows only approved overseas institutional investors to buy its local-currency stocks and bonds under the QFII program. The combined approved quota is $30 billion. The nation's two exchanges have a market capitalization of $3.9 trillion, second only to the United States' $16.6 trillion, according to data compiled by Bloomberg.

The Chinese mainland has approved 13 domestic fund-management companies to set up branches in Hong Kong, Wang said. Nine have won asset-management licenses in the city, while three are already managing publicly raised capital, he said.

The securities regulator on the mainland has had in-depth discussions with its counterpart in Hong Kong and with the city's stock exchanges on sources of funding for mini-QFIIs, product structure and investment execution, Wang said.

China is likely to allow more stocks to be shorted and is working on starting a central agency for short selling, Zhang Yujun, president of the Shanghai Stock Exchange, said in Hong Kong on Friday.

Bloomberg News