Recently, with the approval of the State Council, the State Administration of Foreign Exchange decided to cancel the investment quota restrictions for qualified foreign institutional investors (QFII) and RMB qualified foreign institutional investors (RQFII) (hereinafter referred to as "qualified foreign investors").Wang Chunying, spokeswoman and chief economist of State Administration of Foreign Exchange, answered questions from reporters.
Q:What is the background of abolishing the investment quota restrictions on qualified foreign institutional investors (QFII) and RMB qualified foreign institutional investors (RQFII)?
A: In 2002 and 2011, China launched Qualified Foreign Institutional Investor (QFII) and RMB Qualified Foreign Institutional Investor (RQFII) respectively. Qualified foreign investor scheme is one of the main channels for foreign investors to invest in domestic financial markets, an important institutional arrangement to enhance the convertibility of RMB under capital account, and has played a positive role in the steady opening up and further development of China's financial market.
In recent years,State Administration of Foreign Exchange has earnestly implemented the deployment of the CPC Central Committee and the State Council on promoting the new pattern of comprehensive opening up, deepened the reform of the qualified foreign investor scheme, improved prudential management, abolished the restriction on repatriation of funds and the lock-in period requirements, and allowed qualified foreign investors to hedge their foreign exchange risks regarding their securities assets in China, which greatly facilitated foreign investors to invest in domestic financial markets. Subsequently, the investment demand of foreign investors in China's financial market has been on the rise,with China's stocks and bonds being included in main international indexes, such as MSCI, FTSE Russell, S&P Dow Jones and Bloomberg-Barclays index, and the weights being steadily increased.
The abolition of the investment quota restriction for qualified foreign investors is a major reform of the State Administration of Foreign Exchange to deepen the reform and opening up of the financial market, and serve the new pattern of comprehensive opening up, as well as a reform measure to further meet the investment needs of foreign investors in China's financial market.
Q:What are the legitimate foreign exchange procedures for qualified foreign investors to invest in the domestic securities market after the quota restrictions are lifted?
A: Next, the State Administration of Foreign Exchange (SAFE) will immediately revise the Regulations on Foreign Exchange Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors (SAFE Announcement No.1 of 2018) and other relevant regulations, to make it clear that the investment quota of individual qualified foreign investor will no longer need to be approved. At that time, after obtaining relevant qualifications approved by the securities regulatory authorities, the foreign investors shall entrust a domestic custodian bank to gothrough relevant registration procedures, and open a special fund account in the custodian bank and handle the follow-up remittance of funds and exchange business, with the registration certificate issued by the State Administration of Foreign Exchange.
Q:Will the restrictions on the pilot countries and regions of qualified foreign institutional investors (RQFII) be lifted?
A: Yes, the limitations on the pilot countries and regions of RQFII will be lifted, together with the abolition of restrictions on the investment quota of qualified foreign investors. Qualified foreign institutions around the world are welcome to use overseas RMB to carryout domestic securities investment. The abolition of restrictions on RQFII pilot countries and regions will further facilitate foreign investors to invest in the domestic securities market and enhance the depth and breadth of China's financial market.
