The qualified domestic institutional investor (QDII) scheme enables domestic fund managers to invest onshore capital outside of China.
Chinese regulators revived the QDII programme in April after a three-year halt to quota issuance. However, money has continued to flow out of QDII funds.
The funds saw net outflows of RMB 14.9bn ($2.17bn) year-to-date, with redemptions across almost all Morningstar’s QDII categories, according to data from the fund research firm.
The only QDII categories that had net inflows this year are Greater China allocation and US equities, according to Morningstar data.
QDII funds inflows/(outflows) (RMB m)
| QDII Morningstar category |
YTD Inflows / (outflows) |
One year inflows / (outflows) |
| China Fund QDII Greater China Allocation |
289 |
208 |
| China Fund QDII US Equity |
120 |
116 |
| China Fund QDII Other |
(13) |
(44) |
| China Fund QDII Emerging Markets Allocation |
(18) |
(15) |
| China Fund QDII Emerging Markets Equity |
(25) |
(81) |
| China Fund QDII Commodities |
(132) |
(1,458) |
| China Fund QDII Asia-Pacific ex-Japan Equity |
(156) |
(202) |
| China Fund Sector Equity Technology and Communications |
(366) |
(1,617) |
| China Fund QDII Asia Allocation |
(375) |
(824) |
| China Fund Market Neutral |
(424) |
(607) |
| China Fund QDII Greater China Equity |
(616) |
(3,127) |
| China Fund QDII Global Allocation |
(683) |
(860) |
| China Fund QDII Global Equity |
(1,214) |
(2,801) |
| China Fund QDII Sector Equity |
(2,027) |
(3,066) |
| China Fund QDII Global Bond |
(9,300) |
(11,543) |
| TOTAL |
(14,938) |
(25,919) |
Source: Morningstar
The QDII programme, which is the oldest channel for Chinese to invest offshore, has not done well since it first launched in 2007, Stewart Aldcroft, Asia-Pacific senior adviser for markets and securities services at Citibank, said previously.
Firms launched the first QDII products in 2007, just before the global markets collapsed in 2008, he said. “Retail investors who took advantage of that got heavily burdened.”
Similarly, Hong Kong-domiciled funds offered on the mainland through the Hong Kong-China mutual recognition of funds (MRF) scheme, which mostly invest in markets outside of China, have continued to have outflows during the year.
Hong Kong interest
The Greater China region, particularly Hong Kong, has become a favoured investment destination for Chinese investors who seek equities. Funds that invest in Hong Kong through the Stock Connect schemes saw net inflows during the year, according to Morningstar data.
Funds under the Shanghai-Hong Kong-Shenzhen Allocation and Shanghai-Hong Kong-Shenzhen equity categories were among the top funds in terms of year-to-date inflows.
Top 10 categories by YTD inflows (RMB m)
| Morningstar category |
YTD Inflows |
One year inflows / (outflows) |
| China Fund Money Market Funds |
779,154 |
2,157,534 |
| China Fund Short-Term Bond Fund |
324,466 |
484,495 |
| China Fund Aggressive Allocation Fund |
11,354 |
(31,295) |
| China Fund Shanghai-Hong Kong-Shenzhen Allocation |
10,121 |
7,102 |
| China Fund Equity Funds |
9,366 |
(14,432) |
| China Fund Commodities |
8,692 |
9,318 |
| China Fund Shanghai-Hong Kong-Shenzhen Equity |
7,339 |
7,700 |
| China Fund Moderate Allocation Fund |
4,555 |
(2,722) |
| China Fund Sector Equity Health |
2,042 |
371 |
| China Fund Convertible Bond |
1,076 |
945 |
Source: Morningstar
Allocation and bond funds saw the biggest outflows during the same period.
Bottom 10 categories by YTD outflows (RMB m)
| Morningstar category |
YTD Inflows / (outflows) |
One year inflows / (outflows) |
| China Fund Flexible Allocation Fund |
(225,385) |
(324,020) |
| China Fund Pure Bond |
(39,204) |
(134,507) |
| China Fund Guaranteed Funds |
(28,242) |
(61,964) |
| China Fund Aggressive Bond Fund |
(19,113) |
(43,275) |
| China Fund Conservative Allocation Fund |
(15,402) |
(29,591) |
| China Fund Normal Bond Fund |
(12,216) |
(37,019) |
| China Fund QDII Global Bond |
(9,300) |
(11,543) |
| China Fund QDII Sector Equity |
(2,027) |
(3,066) |
| China Fund QDII Global Equity |
(1,214) |
(2,801) |
| China Fund QDII Global Allocation |
(683) |
(860) |
Source: Morningstar
