China may allow five to six brokerages and fund management companies to try out trading yuan-denominated funds in Hong Kong that invest in the Chinese mainland stock market.

Initially the combined size of the funds is expected at 10 billion yuan (US$1.47 billion), the China Securities Journal reported yesterday, quoting an unidentified person.

The size will be expanded gradually on a trial basis to control risks, and the funds are likely to be sold via banks to let individuals invest in the A-share market rather than private-equity funds that target the rich and institutional investors, the person said.

More than 20 mainland brokerages operate in Hong Kong, accounting for 9 percent of the market, and nine fund firms have been approved to set up branches in Hong Kong, the newspaper said.

Yao Gang, vice chairman of the China Securities Regulatory Commission, said at the Lujiazui Forum in Shanghai on Saturday that the mainland may allow trading of yuan-denominated fund products in Hong Kong as it seeks to open its financial market further.

"We have been trying to launch more such pilot programs to accelerate the mainland's financial market opening-up process," Yao said.

The mainland has been opening its financial markets to overseas investors, letting them set up joint equity and fund management firms. It has launched the qualified foreign institutional investors scheme.

These initiatives aim to diversify investment channels for investors, accelerate the opening-up of the sector and serve to integrate the domestic regulatory system with international standards, according to Yao.