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China to issue $10bn worth of QDII quotas

The regulators just issued $3.36bn of fresh quotas last month, after QDII quota allocations were suspended in April 2019.

China will start issuing $10bn worth of qualified domestic institutional investor (QDII) quotas in the near future, according to a Caixin report, quoting an unnamed official from the State Administration of Foreign Exchange (SAFE).

The official told reports at an annual financial forum that the quotas will be granted in several batches, the report said. A Bloomberg report noted that an earlier version of the Caixin article said the QDII would be increased between $2bn and $3bn every quarter, with a cap for annual increases kept at $10bn. Caixin has since removed those details, according to the Bloomberg report.

Launched in 2006, the QDII programme allows domestic institutions and fund managers to invest offshore within allowable quotas.

The plan comes after the regulator issued $3.36bn of fresh quotas to 18 institutions last month, the first since April 2019, according to data from SAFE. Before that, new QDII quota allocations were suspended for three years from 2015 when China’s stock market crash triggered massive capital outflows. They were resumed in April 2018 and 24 firms received fresh QDII quotas of $8.33bn.

In total, SAFE has granted $107.3bn of QDII quotas, according to data from the agency.

SAFE’s decision to allow more outbound flows comes as the renminbi has strengthened against the dollar. According to the Caixin report, the local currency has appreciated almost 5% against the US dollar over the past three months.

Besides the QDII scheme, the SAFE official added that China has plans of expanding the qualified domestic limited partner (QDLP) and the qualified domestic investment enterprise (QDIE) programmes, which are being tested in Beijing, Shanghai and Shenzhen, according to Caixin.

The QDLP scheme allows foreign managers to raise money in China from qualified investors, with assigned quotas, to invest in offshore traditional and alternative investments, including overseas equity and bond funds, hedge funds and property. The QDIE is a similar programme allowing domestic investors to invest in foreign private companies, hedge funds and real estate, and is regarded as the Shenzhen version of QDLP scheme.

Launched in 2012 in Shanghai, the QDLP has been extended to Beijing earlier this year. In total, Beijing can allocate $5bn worth of quotas to participating asset managers. Like the Shanghai programme, participating managers will have to establish a wholly foreign-owned enterprise (WFOE) in Beijing before applying for the QDLP scheme in the capital, FSA previously reported.

As of April this year, there were 40 QDLP funds offered by 28 managers, according to a previous Fleishman Hillard report.

Part of the Mark Allen Group.