State Council Doubles Quota for Qualified Foreign Institutional Investors

The Chinese central government has doubled the investment quota for qualified foreign institutional investors (QFII).

On 14 January the State Administration of Foreign Exchange (SAFE) announced that China’s State Council had given its approval to an increase in the total quota for QFII’s to USD$300 billion from $150 billion.

According to an official statement the move is intended to “accommodate foreign investment demand on China’s capital market.”

In July 2015 SAFE raised the quota from $80 billion to $300 billion, after instituting a quota of $17 billion a year after the scheme’s launched in 2002.

Figures from the regulator indicate that SAFE has provided $101.06 billion in quotas to 287 foreign institutions as of the end of 2018.

QFII’s are a key channel for overseas investors to channel funds into China’s capital markets, and are considered a primary mechanism for opening of the country’s financial sector.

Over the past two years SAFE has undertaken a slew of reforms of foreign exchange administration in relation to QFII’s, including the cancellation of remittance ratio restrictions, cancellation of lock-in period requirements, allowing QFII’s to use their securities for foreign exchange hedging domestically, and measures to increase the convenience of QFII usage.

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