Caixin
Sep 07, 2016 03:41 PM
POLITICS & LAW

China Eases RQFII Rules in Bid to Boost Financial Markets

(Beijing) – China's central bank has released new rules making it easier for big foreign investors to buy Chinese stocks and bonds, in a broader bid to integrate the nation's financial system with the rest of the world and support domestic markets being pressured by the slowing Chinese economy.

The modifications are part of adjustments to the Renminbi Qualified Foreign Institutional Investor (RQFII) program, which is administered by the State Administration of Foreign Exchange (SAFE). RQFII allows foreigners to trade in Chinese financial markets that are mostly closed to other outsiders.

Under the rules released Monday, investors can receive a base investment quota, which is no greater than a certain proportion of their assets, after a simple registration with the SAFE. That streamlines the previous practice, which required a lengthier and more rigorous formal approval from SAFE for each new RQFII applicant.

Investors who want a larger investment quota beyond their original allotment will still need to apply for an approval from SAFE, said the document, jointly released by the People's Bank of China and SAFE.

The new regulations will also shorten the lockup period for RQFII investments from 12 months to three.

Launched in 2011, the RQFII program allows financial institutions to use offshore yuan to buy securities in mainland markets. The program has now enrolled 170 institutional investors from 17 countries and regions, with total approved investment quota exceeding 510 billion yuan ($76.4 billion) as of Aug. 31.

The change is the latest step in China's drive to further open its capital markets to foreign investors, as part of a bid to better integrate the nation's financial system with the rest of the world.

As part of that effort, Beijing recently approved a link that will allow Hong Kong-based investors to buy stocks listed in Shenzhen, expanding a program linking the Hong Kong and Shanghai stock exchanges in 2014. In February, SAFE also raised the investment limit for the older Qualified Foreign Institutional Investor (QFII) plan, which allows foreigners to invest in China's financial markets.

Contact reporter Han Wei at weihan@caixin.com; editor Doug Young (dougyoung@caixin.com)

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