program, one of the first efforts to internationalize the RMB, represents Chinas effort to allow, on a selective basis, global institutional investors to invest in its RMB denominated capital market.Once licensed, foreign investors are permitted to buy RMB-denominated A shares in Chinas mainland Shanghai and Shenzhen stock exchanges.Thus foreign investors benefit from an opportunity to invest onshore, which is otherwise often insulated from the rest of the world, and subject to capital controls governing the movement ofassetsin-and-out of the country.

The program has been in operation for over a decade, and quotas allocating RMB under licenses have expanded steadily. By the end of April 2011, 103 licensed QFII investors had been granted a combined quota of $20.7 billion to invest in Chinas capital markets under the QFII program, UBS AG currently holds the greatest single share of quota. Foreign access to Chinas yuan-denominated A stocks are still limited, with quotas placed under the QFII program amounting to US$30 billion.4

In April, 2012, the Qualified Foreign investment quota was increased from US$30 billion to US$80 billion. Before the increase, the overall value of approved QFII andRQFIIQFII5) funds was only 0.8% of total market capitalization and only US$25 billion of the US$30 billion quota was used. While aspects of the increased quota seem likely to take business from Hong Kong,a pilot program in Wenzhoufor domestic investors to invest abroad was considered a possible offset for the financial center.6The QFII expansion was also followed quickly by the approval of newETFproducts that will be denominated in offshore yuan (CNH) but will trade on theHong Kong Stock Exchange.7

China granted $910 million worth of investment quotas to 11 foreign institutional investors in March 2013. The quotas, under the Qualified Foreign Institutional Investor (QFII) scheme, were awarded to overseas institutions including Generali Fund Management S.A, IDG Capital Management (HK) Ltd and Cutwater Investor Services Corp. By the end of March 2013, China had awarded a combined $41.745 billion of QFII quotas to 197 foreign institutions.8

By the end of February 2014, the total quotas issued under the QFII programme to $52.3 billion as of Feb. 28 from $51.4 billion at the end of December, and to 180.4 billion yuan ($29.44 billion) from 167.8 billion yuan under theRQFIIprogramme, according to data by the Chinese agency, SAFE9

Regulations of the QFII program were based on Temporary Regulation on Domestic Securities Investment by Qualified Foreign Institutional Investor (), which was publicized on 5th Nov 2002 and ceased to be in effect on 1st Sep 2006, and Regulation on Domestic Securities Investment by Qualified Foreign Institutional Investor(), which is publicized on 24th Aug 2006, and came into effect on 1st Sep 2006.10

Pursuant to Regulation on Domestic Securities Investment by Qualified Foreign Institutional Investorto qualify as a QFII, the candidate must:

have stablefinance, good credibility, meet the minimumassetscale set byChina Securities Regulatory Commission(CSRC);

the number of staffs meet the requirement set by the authority in its own country or area;

has healthygoverning structureand complete internal control system, received no significant punishment in the last 3 years;

candidates home country has complete legal and supervision system, and its home country or home area has signedMemorandum of Understanding(MOU) with CSRC, and maintains effective supervision cooperation;

other requirements set by CSRC based onprudence.

Deutsche BankAG or Deutsche Bank Aktiengesellschaft

The Hongkong and Shanghai Banking Corporation Limited

Government of Singapore Investment CorporationPte. Ltd.

La Compagnie Financire Edmond de Rothschild Banque

Prudential Asset Management (Hongkong) Limited

Sumitomo Mitsui Asset Management Company, Limited

The Trustees ofColumbia Universityin the City of New York

First State Investment Management(UK) Limited

Shinhan BNP Paribas Asset Management Co., Ltd.

Prudential Financial Securities Investment Trust Enterprise

American International Assurance Company,Limited

City of London Investment Managementi Company Limited

ING Investment Management Aisa Pacific (Hong Kong) Limited

Board of Regents of The University of Texas System

British Columbia Investment Management Corporation

BlackRock Asset Management North Asia Limited

CITIC Securities International Investment Management (HK) Limited

Pacific Alliance Investment Management (HK) Limited

Qualified Domestic Institutional Investor(QDII)

State Administration of Foreign Exchange(SAFE)

Zhao, Samuel. A Guide to the Qualified Foreign Institutional Investors Scheme for Navigating Investment into China.

Zhao, Samuel. A Guide to the Qualified Foreign Institutional Investors Scheme for Navigating Investment into China.

China further loosens its capital controls- International Herald Tribune (August 20, 2007). Retrieved on January 21, 2009.

Legg Mason Seeks China License to Trade Yuan-Denominated Stocks- Bloomberg (March 10, 2009). Retrieved on March 10, 2009.

Chiu, Jeckle, et al.New RQFII Rules Announced: New Ways to Use Offshore RMB – Part IIMayer Brown(law firm) web post, 4 January 2012. Retrieved 2012-04-10.

Stephen, Craig,Chinas welcome mat for foreign investors,

Sweeney, Pete,China approves new yuan ETFs in Hong Kong,

UPDATE 1-China raises foreign institutional investor quota by $3 bln in Feb.

China Securities Regulatory Commission () website

Articles with Chinese-language external links

This page was last edited on 14 January 2019, at 12:40

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