CHINA: CSRC Promulgates Provisions on the Administration of China Securities Investment by India QFIIs

Thursday August 9 2012

In relation to the CSRC that promulgates provision on the administration of securities investment by India QFIIs, on July 27, the China Securities Regulatory Commission promulgated Provisions on Relevant Matters Concerning the Implementation of Measures for the Administration of Securities Investment within the Borders of China by India Qualified Foreign Institutional Investors (QFIIs).

The Provisions aim to reduce QFII eligibility requirements, streamline review and approval procedures, and relax restrictions on the establishment of securities accounts by QFIIs, their investment scope and shareholding ratio. Compared with the prior promulgated Circular on Relevant Matters Concerning the Measures for the Administration of Securities Investment within the Borders of China by Qualified Foreign Institutional Investors (QFIIs), the Provisions have made the following revisions: first, encouraging the entry of overseas long-term capital by reducing the eligibility requirements for QFIIs; second, increasing operational convenience by permitting QFIIs to select multiple brokers; third, expanding the scope of investment by permitting QFIIs to invest in inter-bank bond market and private placement bonds issued by small and medium enterprises (SMEs); and fourth, increasing the shareholding ratio limit of all overseas investors from 20% to 30%. The Provisions has also expressly recognized the method of electronic submission of QFII eligibility application documents and simplified the requirements for eligibility application documents.

The CSRC has mainly adopted the following suggestions: first, to increase transparency by identifying the QFII eligibility application documents in Article II of the Provisions instead of publishing them through online application system as originally planned; second, to make further explanations in Article 7 of the Provisions on the establishment of securities accounts by QFIIs for customer funds such as funds and insurance funds; and third, to revise the statement of Article 8 of the Provisions concerning the scope of investment in the interest of satisfying the needs for QFIIs to invest in inter-bank bond market and private placement bonds issued by SMEs. In addition, the above-mentioned head of relevant CSRC department said that private equity investment institutions may apply for QFII qualifications as asset management institutions. As for other suggestions on the further relaxation of QFII foreign exchange administration policies and clarifications on QFII tax policies, the CSRC will try to conduct further study in coordination with relevant departments.

After the promulgation of the Provisions, the CSRC will continue to speed up QFII qualification review and approval and keep coordinating with relevant departments to facilitate the operation of QFIIs with a view to attracting the flow of more overseas long-term capital into China’s capital market.

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