China Eases Restrictions on Foreign Investors

Despite China’s launching of a body to screen foreign investment in Chinese companies, Beijing has now announced it will relax its control over qualified foreign institutional investers (QFII), from Xinhua:

Compared with previous rules, the regulation published by the China Securities Regulatory Commission (CSRC) on Friday lowers the QFII threshold and allows QFIIs to invest in the nation’s capital market through more than one securities dealer.

The regulation also allows QFIIs to invest in the interbank bond market and private placement bonds issued by small and medium-sized enterprises and hold up to a 30-percent stake in a listed company, up from the previous 20-percent stake cap.

The move aims to make it easier for QFIIs to invest in China’s capital market, part of the nation’s efforts to free up capital flows and accelerate the opening of domestic capital markets.

The CSRC said it will continue to speed up the approval of QFIIs, facilitate the operation of the QFII scheme with related authorities and strengthen supervision to attract more long-term overseas investments.

According to the Wall Street Journal, the new regulations are similar to the draft rules issued last month:

Under the new rules, which came into effect Friday, the China Securities Regulatory Commission said it had lowered minimum qualification requirement and simplified the approval process for applicants under the Qualified Foreign Institutional Investors program, the primary program for foreign investors to enter China’s capital markets.

The new rules, which are similar to the draft rules issued last month, said China has expanded the investment scope of QFIIs and allowed QFIIs to hold more shares in domestically listed companies.

The CSRC said in the statement that it will continue to speed up its approval for QFIIs and will look at ways to relax foreign-exchange restrictions on QFIIs further with relevant authorities.

It will also clarify tax issues about QFIIs as soon as possible, it said, without offering more details on what issues.

As China’s economy looks as though it will miss it’s 2012 growth target, the CSRC claims foreign investors will be able to make more long-term investments, Reuters reports:

The new rules will make it easier for foreign groups to obtain the status of qualified institutional investor, and thus enter the Chinese market, said the China Securities Regulatory Commission.

Foreign investors will now also be able to put their money into China’s interbank bond market and high-yield bond market, said the regulator.

The steps should lead to “more long-term foreign investment on China’s capital markets,” according to a statement from the regulator.

New applications for foreign investors have been sped up recently, with the securities regulator approving 37 new qualified investor licences for the first six months of this year compared with 29 for the whole of last year.

July 29, 2012 11:09 AM
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