China Doubles Quotas Under Two Outbound Investment Programs

China will more than double the limits on Chinese investments abroad under two pilot programs as part of efforts to further liberalize the country’s capital markets, the national foreign exchange regulator said Tuesday.

The increases on investment quotas will enable overseas fund managers to raise more money from Chinese institutions and wealthy people to invest abroad. It is the first increase since the launch of the two trial programs about five years ago.

The quota under the Qualified Domestic Limited Partnership (QDLP) program will more than double to $5 billion from the current $2 billion, said the State Administration of Foreign Exchange (SAFE). The QDLP program was initiated in 2013 in Shanghai, allowing domestic investors to put money into overseas private equity funds, hedge funds and real estate investment trusts.

Quotas for another outbound investment pilot in Shenzhen, the Qualified Domestic Investment Enterprises (QDIE), will also increase to $5 billion from the current $2.5 billion, SAFE said. This program allows mainland investors to access not only overseas securities but also nonpublicly traded bonds, foreign property and other nonfinancial assets.

The investment quota increases are the latest move by the government to relax capital controls and open up the country’s capital markets. China’s central bank governor Yi Gang said in early April that currently “stable” cross-border capital flows provided a window of opportunity for the country to push ahead with the capital market reforms.

“Moving forward, the SAFE will work with other departments and local governments to further improve the management of QDLP and QDIE to serve the opening-up of the economy,” the agency said in its Tuesday statement (Link in Chinese).

China launched the QDLP and QDIE pilot programs to widen domestic investors’ access to global assets. But quota allocations were suspended in late 2015 amid rising concerns over capital flight that depleted the country’s foreign-exchange reserves. Caixin learned that quota issuances were resumed in late 2017 as the country’s capital flows stabilized.

Contact reporter Han Wei (weihan@caixin.com)