A qualified foreign institutional investor (合格境外机构投资者) (QFII) refers to an overseas fund manager, insurance company, securities company or other asset management company that has obtained approval from China’s financial regulators to invest in the domestic Chinese securities market.
The China Securities Regulatory Commission (CSRC) is responsible for conferring approval for QFII’s, while the State Administration of Foreign Exchange (SAFE) is responsible for the allocation of investment quotas.
The QFII system was first launched in 2002, with the release of the “Qualified Foreign Institutional Investor Domestic Securities Investment Temporary Administrative Measures” (合格境外机构投资者境内证券投资管理暂行办法) by CSRC, the People’s Bank of China (PBOC) and SAFE on 5 November.
SAFE subsequently issued the “Qualified Foreign Institutional Investor Domestic Securities Investment Foreign Exchange Temporary Administrative Regulations” (合格境外机构投资者境内证券投资外汇管理暂行规定) on 28 November of the same year.
Zhou Xiaochuan, former head of PBOC who was at the time the chair of the CSRC, first flagged Beijing’s plans to establish the QFII system at a meeting of the International Organization of Securities Commissions (IOSCO) held in June 2002.
At the meeting Zhou said that China planned to use the QFII system to provide overseas financial institutions with a means of investing in RMB-denominated A-shares.
On 18 July, the Shenzhen Stock Exchange held a special meeting on attracting QFII’s to China, and resolve technical problems in relation to the proposed system.