China is reconsidering to launch the qualified domestic individual investor (QDII2) programme, which will allow qualified individual investors to invest in offshore securities directly, according to a report published by state-owned China Forex magazine, quoting Ye Haisheng, head of capital account management department at China’s State Administration of Foreign Exchange (SAFE).
Each qualified individual in the mainland already has a quota of $50,000 per year to spend on travel, offshore studies and non-investment insurance. Under QDII2, individuals will be able to include offshore investments in that yearly quota.
The QDII2 is similar to the qualified domestic institutional investor (QDII) programme launched in 2006, in which firms apply for a quota and offer QDII funds to investors.
The biggest difference between the QDII and QDII2 programmes is that individual investors under QDII scheme can only invest in offshore investments indirectly through QDII products. Under the QDII2 scheme, individual investors are able to gain quotas directly and decide which securities they want to purchase, according to the report.
“The QDII2 scheme will allow qualified individual investors to participate offshore market in a more direct and broader way,” Ivan Shi, director of data analytics at Z-Ben Advisors told FSA.
“For example, if investors want to buy Telsa stocks but the QDII products available cannot satisfy that, then investors may use the QDII2 scheme to meet their demands,” he explained.
The QDII2 programme was initially expected to launch in 2015 but was delayed as authorities wanted to clamp down capital outflows. At the same time, the regulator also stopped issuing new QDII quotas. In 2017, SAFE was reportedly seeking approval from the State Council to launch the individual investor scheme.
However, there have been signs that China is relaxing the amount of capital going out of the country, as it has been aggressive in giving out new QDII quotas in recent months.
In January, China granted $9.02bn worth of quotas to 21 firms, and in 2020 alone, there were three rounds of quota issuances, which totalled $12.72bn. Before that, the last time the regulator issued quotas was in April 2019.
In addition, regulators in China, Hong Kong and Macau are also preparing for the launch of the much-anticipated Greater Bay Area Wealth Connect Scheme. Earlier this month, the regulators have agreed supervisory, enforcement and liaison arrangements for the Wealth Management Connect Pilot Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).
