CHINA: Foreign Financial Investment Quota Rules Relaxed

Tuesday September 6 2016

China has relaxed quotas for qualified foreign institutions investing in its stock market.

The People’s Bank of China and State Administration of Foreign Exchange have released a document according to the State news agency Xinhua, indicating that foreign investors in the country`s Renminbi Qualified Foreign Institutional Investor (RQFII) program will be granted quota limits based on their aggregate assets.

Previously, the RQFII quota was subject to approval from financial regulators. Institutions will still have to apply for extra investment quotas, and sovereign wealth funds and central banks remain exempt from the restriction.

Launched in December 2011, the RQFII program aims to widen investment channels for overseas yuan funds on the Chinese mainland, opening the domestic market more widely and increasing the global use of renminbi, the Chinese currency.

Foreign investment is limited in China’s capital markets, which are accessible via certain restricted programs, including QFII, RQFII and an exchange-link scheme between Shanghai and Hong Kong. The combined QFII and RQFII programs account for less than 3 percent of China’s $5.3 trillion stock market capitalisation.

According to the document, by the end of August 2016, China had approved over 510 billion yuan (about 76.3 billion U.S. dollars) for 170 foreign investors under the program.

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