China relaxes rules on QFIIs to attract long-term capital

Beijing, Sept 28 | Updated: Sep 29 2006, 05:30am hrs
China has drastically relaxed rules governing qualified foreign institutional investors (QFII), including reducing the required minimum securities assets by half to attract long-term capital in order to stabilise the stock markets.

The new rules on QFII aim to attract long-term overseasinvestments in order to stabilise the Chinese stock markets, media reports quoted sources with the China Securities Regulatory Commission (CSRC) as saying.

China announced the revised version of the 2002 provisional rules last August, lowering the threshold for foreign institutions that stress long-term investments.

The new rules reduce the required minimum securities assets from $10 billion to $5 billion for QFII applicants. To qualify, insurance companies must have a history of at least five years, much shorter than the 30 years previously stipulated.

The new rules also allow QFIIs to open separate securities accounts for all their long-term capital.

The government would expand the QFII programme, by allowing more overseas investors to invest in the countrys capital market and with the priority of encouraging long-term investments, Xinhua news agency reported.

Since 2003 when China began to allow overseas institutional investors to enter the capital market as QFIIs, the country has awarded investment quotas totalling $7.84 billion to 48 QFIIs. By the end of August, the QFIIs had invested a total of $6.93 billion in China while their combined assets had risen to $9.44 billion, 88% of which were securities assets.