China's securities regulator will begin a trial program that for the first time allows local fund houses to raise money offshore for investment in the domestic financial market, two sources said.

At least 80 percent of the money raised will have to be invested in the domestic bond market, said the two sources who are familiar with the matter but who are not authorised to publicly disclose the details.

"The move is based on the overall financial trend of the yuan increasingly becoming more international," one of the sources said yesterday. "The banks are already moving forward in this aspect and it's time for brokerages and securities firms to follow suit."

Mini-QFII takes after the eight-year-old Qualified Foreign Institutional Investor program, which allows overseas fund managers to invest in Chinese mainland stocks and bonds on behalf of foreign investors using money raised overseas.

Frances Cheung, strategist at Credit Agricole in Hong Kong, said the presence of foreign investors would help increase liquidity in the bond market.

"On the one hand there is concern about equity market bubbles, and on the other it is always good to have more foreign participants in the bond market because it can help boost secondary market liquidity with more trade ideas," she said.

Speaking at a financial forum in Hong Kong yesterday, Shang Fulin, chairman of the China Securities Regulatory Commission, said the mainland will continue to open its monetary and financial markets.

"For yuan assets, we are going to open the mainland market up more for Hong Kong enterprises, collaborate more with the Hong Kong Exchange and work out better settlement regulations and arrangements," Shang told the forum.

Chinese brokerages with international arms such as Guotai Junan are expected to participate in the mini-QFII program.

"Most of the money will be allowed to invest in the bond markets, so as to ensure stable development of the trial program," one of the sources explained.