By Kevin Yao

HONG KONG - China will relax conditions for mainland firms, especially small and medium-sized enterprises, to list in Hong Kong, the country's securities regulator said on Saturday, in a move that could encourage privately owned Chinese companies to tap funds in the city.

The regulator also said it would encourage qualified Hong Kong financial institutions to form joint ventures with mainland partners in stock and futures brokerages, fund management firms and stock investment consulting firms, capping a week of news on co-operation between the mainland and Hong Kong.

"Currently, the conditions on domestic firms to issue H-shares in terms of companies' size is still high and many medium- and small-sized companies cannot meet such requirements," China's Securities and Regulatory Commission (CSRC) said in Hong Kong.

"To support more domestic firms to list shares in Hong Kong, the CSRC will revise the relevant rules to relax the conditions on finance and size of companies under the premise of strengthening corporate governance and information disclosure."

The Hong Kong exchange has the final say in listing of any company in the city's bourse.

The Hong Kong stock exchange listing committee, which consists of lawyers, investment bankers and exchange officials among others, scrutinises listing applications before giving or denying approval. Among the conditions is a track record of profitability.

Several small and mid-sized Chinese companies have been starved of capital to pay for expansion as a result of a tight funding environment in the world's second-largest economy.

Hong Kong's rise to the top of the world's IPO market, as ranked by value, was supported by a rush of listings by Chinese state-owned enterprises starting in the early 2000s.

FUNDS BOOST

The China securities regulator also said China would increase quotas on the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme, which allows foreign investors to buy into Chinese mutual funds using offshore yuan.

"We will draw experiences from the pilot scheme and further increase the quota on RQFII and expand the scope of institutions involved in the pilot scheme, enrich products and relax restrictions on investment ratios," the regulator said.

In April, China raised the RQFII quota to 70 billion yuan ($10.99 billion) from 20 billion yuan.