China’s State Administration of Foreign Exchange (SAFE) has lifted the QFII threshold to $300bn from $150bn after three years of reforms to the scheme, according to a statement from the regulator.
The scheme, which was introduced in 2002, is one of the major channels for institutional investors to gain access to China’s equities and bond markets, within allocated quotas.
The scheme operates in tandem with its renminbi equivalent (RQFII) and the more recent Stock Connect programmes that facilitate two-way investment between mainland China and Hong Kong.
SAFE implemented improvements to the QFII system in 2016-2018, including eliminating the 20% remittance ceiling and cancelling the three-month lock-up period requirement for new and existing QFII participants from mid-June 2018, according to the statement. In addition, QFIIs were allowed to perform hedging to manage foreign exchange risks.
Prospective users of the QFII scheme will still need approval from China’s State Council. Since the quota programmes began, SAFE has awarded a total of $101.05bn in QFII quotas to 287 licence holders, according to SAFE.
China’s equities markets were among the world’ s worst performers last year: the MSCI China All Shares index fell 18.75%, according to FE . Yet, foreign inflows maintained momentum throughout the second half of the year as China A-shares gained partial inclusion in the benchmark MSCI emerging market index.