By Yin Lei
China's securities watchdog will merge two inbound investment schemes that enable foreign institutional investors to trade securities in the country and concurrently increase their investment choices.
On Monday night, the China Securities Regulatory Commission (CSRC) released draft rules that offer uniform provisions for inbound investments under the Qualified Foreign Institutional Investor (QFII) scheme and the RMB Qualified Foreign Institutional Investors (RQFII) scheme.
These two schemes, piloted in 2002 and 2011 respectively, channel inbound capital from foreign institutional investors to China's capital markets.
The amended rules aim to close some loopholes of the two schemes, achieve high-quality opening-up of China's capital markets, and attract more long-term investments from overseas, according to the CSRC.
By these draft rules, open for public comment until March 2, foreign institutional investors would no longer need to apply twice for approvals to trade under the QFII and RQFII schemes, denominated in foreign currencies and the RMB respectively. Instead, they would need only one greenlight to qualify for both.
The entry threshold for these two schemes would be lowered, with quantitative requirements to be scraped, application documents simplified, and approvals hastened.
The drafts rules would widen the investment choices of QFIIs and RQFIIs to cover shares at China's over-the-counter stock market, bond repurchase deals, private funds, financial derivatives, commodity futures, options and margin trading.
The management of custodians would be improved, removing the limit on the number of custodians employed under the QFII scheme.
Continuous supervision would be strengthened, requiring investors to make regular reports on their overseas hedging transactions.
As of the end of 2018, a total of 309 foreign institutions had qualified for the QFII scheme, receiving 101.1 billion U.S. dollars of quota out of the total quota of 300 billion U.S. dollars. Under the RQFII scheme, which covers 19 countries and regions, 646.7 billion yuan (96.05 billion U.S. dollars) of quota, out of a total of 1.94 trillion yuan (288.1 billion U.S. dollars), had been given to 233 foreign institutions.
