China Awards $9.02 Billion of Foreign Investment Quotas
China allocated more than $9.02 billion of quotas to domestic trust companies in the Qualified Domestic Institutional Investors (QDII) program as the country encourages domestic institutions to pour more money into foreign capital markets.
As of Nov. 30, the State Administration of Foreign Exchange (SAFE) allocated the QDII quotas to 24 trust companies, among which five received a quota for the first time.
SAFE said in October that it would issue about $10 billion of new QDII quotas in several batches after it issued $3.36 billion of new quotas in September, the first in a year and a half. The annual total quota in 2020 would represent a 10% expansion of the program.
The increase in QDII quotas coincided with the appreciation of the yuan. The yuan is trading at its highest levels in more than two years, fueling expectations that Beijing would move to rein in the surge. The yuan gained more than 8% over the past five months.
QDIIs are domestic institutional investors that have obtained approval from regulators to invest in offshore securities and bonds under a system first launched in 2006 and overseen by the China Securities Regulatory Commission (CSRC) and the China Banking and Insurance Regulatory Commission (CBIRC).
The five trust companies receiving quotas for the first time are China Resources Shenzhen International Trust Co. Ltd., Minmetals International Trust Co. Ltd., Huaneng Guicheng Trust Corp. Ltd., Everbright Trust Co. Ltd., and China Fortune International Trust Co. Ltd. Each received a quota of $100 million.
Huabao Trust Co. Ltd., a unit of state-owned steelmaker Baosteel Group that had received QDII quotas before, was awarded a new quota of $100 million. In 2019, no trust companies were allocated any QDII quota.
In addition to those six, four more trust companies are qualified to participate in the QDII program but haven’t been approved for any quotas.
By the end of 2019, Chinese trust companies invested 48.19 billion yuan ($7.4 billion) through the QDII program, accounting for 0.22% of total assets under management by the trust industry, according to data from China Trustee Association.
Chinese trust companies conduct relatively less QDII investment compared with other institutional investors because the overall trust industry lacks the capability to manage overseas investments, a senior executive at a trust company said.
Direct investment in stocks has never been a specialty of trust companies, let alone overseas stock markets which require strong research ability and risk control, a trust manager said.
Contact reporter Denise Jia (email@example.com) and editor Bob Simison (firstname.lastname@example.org).
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