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China To Improve QFII And RQFII Programmes

by Mary Swire,, Hong Kong

13 November 2012

Th China Securities Regulatory Commission (CSRC) has disclosed that it intends to improve both the Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) programmes, to attract more long-term investment into the Chinese capital markets, both directly and through Hong Kong.

Earlier this year, the CSRC had already reduced the QFII’s qualification requirements so that foreign institutions now need to have assets under management of only USD500m, rather than the previous USD5bn, while they also need to have at least two years of local presence, and not the previously-required five years. Total QFII quotas have also been increased to USD80bn from USD30bn.

The CSRC has, to date this year, granted QFII licenses to 57 new foreign investors, while a total of 192 foreign investors have been approved since the program started in 2002.

To support the further development of the domestic capital market, the CSRC has recently confirmed that it will continue to accelerate licence approvals wherever possible, and introduce further reforms to facilitate the QFII programme’s operation.

In addition, the CSRC has promised to raise the quota and ease investment restrictions in the parallel RQFII programme, which, launched as a pilot in December last year, allows the Hong Kong subsidiaries of qualified Chinese fund managers and securities companies to channel RMB raised in Hong Kong to invest directly in the Chinese bond markets.

At the same time as the increase to the QFII quotas, the RQFII threshold was increased from the initial RMB20bn (USD3.2bn) to RMB50bn, as it had 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.

As at September this year, it was confirmed that the CSRC had released RQFII quotas amounting to RMB39bn. It is now considering an increase to the total threshold, possibly to RMB100bn, together with a relaxation of the rules to allow more financial institutions in Hong Kong to apply for a quota, and to allow for more investment in equity products, such as exchange traded funds.

There was no indication by the CSRC of when details of the enhancements to the QFII and RQFII programmes would be announced.

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 and a description of the report can be seen at
TAGS: investment | law | financial services | capital markets | investment funds | equity investment | China | offshore | Hong Kong | regulation | services

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