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China Lowers The Bar For Foreign Institutional Investors

by Mary Swire, Tax-News.com, Hong Kong

25 June 2012


Following on from the expansion of the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme in Hong Kong in April this year, the China Securities Regulatory Commission (CSRC) is now consulting on an easing of the rules for foreign institutional investors in the domestic Qualified Foreign Institutional Investor (QFII) programme.

In order to increase more long-term investors into the Chinese capital markets, it is proposed by the CSRC that foreign institutions will need to have assets under management of only USD500m, rather than the previous USD5bn, while QFII’s will need to have at least two years, and not the currently-required five years.

In addition, QFIIs will be able to hold 30% of a Chinese listed company, instead of the present 20% limit, and they will also be able to invest in the interbank bond and stock index futures markets.

In April this year, the CSRC increased total QFII quotas to USD80bn from USD30bn. It has, to date, granted QFII licenses to 172 foreign investors since the program started in 2002.

Since the RQFII programme was launched as a pilot in December last year, it has been developed hand-in-hand with the QFII scheme. RQFII status is granted to qualified Chinese fund managers and securities companies to allow their Hong Kong subsidiaries to channel RMB raised in Hong Kong to invest directly in the China bond and equity markets.

Also in April, the RQFII threshold was increased from the initial RMB20bn (USD3.14bn) to RMB50bn having proved, to the CSRC’s satisfaction, that it could also play an active role in expanding the openness of the Chinese capital market, promoting the internationalization of the RMB, and consolidating and enhancing Hong Kong as an international financial centre.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
TAGS: investment | financial services | capital markets | investment funds | equity investment | China | offshore | Hong Kong | services

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