China Accelerates Approval of Investment Quotas for QFIIs and RQFIIs

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Nov. 26 – China’s State Administration of Foreign Exchange (SAFE) has recently accelerated the examination and approval for Qualified Foreign Institutional Investors (QFIIs) again, leading to a total investment quota of US$33.568 billion obtained by 159 QFIIs up to October 31, 2012.

In October, SAFE has examined and approved an investment quota of US$2.75 billion for QFIIs, US$200 million for Qualified Domestic Institutional Investors (QDIIs), and US$9 billion for RMB Qualified Foreign Institutional Investors (RQFIIs). Besides that, an additional investment quota of RMB200 billion was approved by the State Council for RQFIIs on November 13. The total amount of the pilot RQFII quota has reached RMB270 billion.

According to what the spokesman of the China Securities Regulatory Commission (CSRC) said in a press release recently, apart from increasing the RQFII quota, 11 measures which are intended to promote the innovative development of security companies will be successively released. New reformative and innovative measures will be coming out, mainly including formulating regulations on the sale of financial products made by security companies, further expanding the scope of proprietary investments of security companies, and lowering the net capital reduction and risk capital reserve ratio. Furthermore, the spokesman expressed that the implementation of a differentiated policy of collecting individual income tax for dividend and bonus, which encourages long-term investment in the capital market, has been approved in principle.

As introduced by CSRC, with carrying out of a series of measures such as the acceleration of approvals for QFIIs and laying down easier investment operations, more and more foreign investors have shown interest in QFII status. Currently, there have been 192 foreign institutions approved to be QFIIs, among which over 80 percent are long-term investors. For instance, asset management companies, insurance companies, and pension funds.

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