CHINA’S central bank and foreign exchange regulator released revised rules on Friday (Jul 26) to streamline investment by qualified foreign investors, in the latest effort to open up the domestic capital market.
The People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (Safe) published revisions to the 2020 regulation governing the Qualified Foreign Institutional Investor programme (QFII) and its yuan-denominated sibling RQFII.
The new rules, which come into effect on Aug 26, aim to steadily expand the institutional opening up of the financial sector and optimise the system of qualified foreign investors, the central bank said.
China initiated the QFII programme in 2002 to let overseas investors buy into its domestic capital markets. The yuan-dominated RQFII was added in 2011. The main difference between them is the currency used – QFII uses foreign currencies, while RQFII uses the yuan – while their regulatory frameworks, processes and investment operations are otherwise the same.
According to data from WindInfo, foreign investors held stakes in 719 domestically traded shares in China by the end of March, with total market cap of 105.1 billion yuan (S$19.5 billion).
The revised rules expand currency options for QFII fund transfers, allowing investment principal and returns brought in as foreign currency to be remitted out in either foreign currency or yuan.
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They also simplify business registration procedures, the management of accounts and exchange management for qualified foreign investors, as well as unifying the foreign exchange risk management models for QFII and RQFII with the China Interbank Bond Market programme.
The PBOC and Safe published a draft version of the new rules in November followed by a one-month public consultation.
An industry expert close to the central bank said that simplifying management requirements for foreign investors’ domestic securities investments reaffirms China’s commitment to expanding market openness, boosts foreign investor confidence and is expected to attract more long-term capital.
Policymakers in China are increasing efforts to boost the domestic market and lure foreign investments to prop up a slowing economy.
A reform plan released after the recent Third Plenum pledged to make equity investment and venture capital operations by foreign investors in China easier and supporting eligible foreign institutions wanting to take part in financial business pilot projects. CAIXIN GLOBAL
