China’s financial regulators will drop investment restrictions on two of its most popular access schemes for foreign investors, in the country’s latest significant step to boost confidence in its capital markets.
A recent publication from China’s State Administration of Foreign Exchange (SAFE) stated it will cancel investment quota limitations for its qualified foreign institutional investors (QFII) and renminbi qualified foreign institutional investors (RQFII) schemes.
“The abolition of the investment quota for qualified foreign investors this time is another major reform measure taken by the State Administration of Foreign Exchange,” SAFE stated.
It also added the move would “make it more convenient for overseas investors to participate in China’s domestic financial markets, making China’s bond and stock markets more broadly accepted by international markets.”
“With this, we foresee the timeframe in accessing the mainland’s financial sector to be shortened, foreign investors’ financing needs being further supported, and investment demand into China continuing to grow,” says Patrick Wong, head of China business development and client management, HSBC Securities Services.
“HSBC has a very strong pipeline of investors applying for new QFII/RQFII licenses or for increasing their investment quota. This relaxation will be most beneficial to them in speeding up their market access.”
The two investment schemes are a major part of China’s strategy to open its capital markets to global investors.
Since the launch of QFII in 2002 and RQFII in 20011, more than 400 institutional investors from 31 countries and regions have used these channels to access China’s capital markets.
In January, China doubled the QFII quota to $300 billion, but only $111.4 billion of the limit had been used by foreign investors by the end of August.
China’s securities regulator also published draft rules earlier this year that would combine the QFII and RQFII programmes, while also simplifying access for overseas investors.