China may approve fund management companies in Hong Kong to try out trading yuan-denominated funds on the Chinese mainland before October, a Hong Kong newspaper said yesterday.

The plan, or the "Mini QFII (qualified foreign institutional investor)," has largely been finalized but several fund management companies are still negotiating with the authority on the size of their quota, the Hong Kong Economic Times cited an unnamed source as saying.

The source said there will be several restrictions on the program in the early stage, but the most important thing is to launch it in a stable way. The limitations will be phased out if the scheme works well.

According to an earlier report by the China Securities Journal, the combined size of the funds is expected at 10 billion yuan (US$1.47 billion) initially and will be operated by five to six brokerages and fund management companies.

The size will be expanded later on a trial basis. The funds are likely to be sold through banks to allow individuals to invest in the A-share market rather than via private-equity funds that target rich and institutional investors.