QFII quotas, fund exit rules eased
Print Edition
CHINA eased curbs on investment quotas and fund withdrawal for foreign investors in the securities markets as it seeks to open wider its capital market and lure overseas funds for Chinese equities.
Participants in the Qualified Foreign Institutional Investor program will be allowed to invest a base amount which is decided by a formula linked to their assets under management, the State Administration of Foreign Exchange said yesterday as it unveiled new rules on investments made by QFIIs. QFII investors have to apply for quota only when their investments exceed the base quota.
Previously, SAFE granted quota approvals to QFIIs on a case-by-case basis.
The investment amount is subject to a ceiling of US$5 billion, up from US$1 billion previously, under the rules which came into effect immediately.
“The move aims to promote capital-account convertibility and facilitate cross-border investment in an orderly manner,” SAFE said.
SAFE’s relaxation also came as a time when China is facing increasing pressure from capital outflow amid an economic slowdown and yuan depreciation.
“China needs to attract foreign investors to offset pressure of capital outflows,” Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd, said. “More flexibility for QFIIs will encourage capital inflows.”
SAFE also eased rules restricting QFIIs from moving funds in and out of China. Under the new rules, the capital lock-up period for QFII redemptions was cut to three months, down from one year formerly. QFII mutual funds are allowed to make subscriptions and redemptions daily, instead of a weekly basis, under the rules.
However, SAFE kept the restriction that prohibits a QFII from repatriating out of China over 20 percent of its assets in the country every month.
QFII is the main door for foreign institutions to access China’s yuan equities.
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