China removes investment quotas of QFII and RQFII

On May 7, 2020, the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) issued the Regulations on Funds of Securities and Futures Investment by Foreign Institutional Investors (PBOC & SAFE Announcement〔2020〕No.2, referred to as the “Regulations”), to clarify and simplify administrative requirements for the management of securities and futures investment funds of f

On May 7, 2020, the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) issued the Regulations on Funds of Securities and Futures Investment by Foreign Institutional Investors (PBOC & SAFE Announcement〔2020〕No.2, referred to as the “Regulations”), to clarify and simplify administrative requirements for the management of securities and futures investment funds of foreign institutional investors, aiming to further facilitate the participation of overseas investors in China’s financial market.

The key points of the Regulations include: Firstly, restriction on investment quota of QFII and RQFII (hereinafter referred to as “Qualified Investors”) in the domestic securities have been abolished. Qualified Investors will no longer need to apply for any investment quota from SAFE. Instead, the registration management system for the cross-border capital remittance and exchange of qualified investors will be implemented. Secondly, Qualified Investors may independently choose the currency and timing of remitted funds under the integrated management system of local and foreign currencies. Thirdly, the procedures for Qualified Investors to remit securities investment income are significantly simplified, replacing the special audit report on investment income issued by a Chinese certified public accountant and tax clearance or tax filing certificates and other material requirements with Tax Commitment Letters signed by Qualified Investors. Fourthly, the limits on the number of custodians are removed, and a single Qualified Investors may choose to entrust multiple domestic custodians, and appointed one of the custodians as the main custodian to report to relevant authorities. Fifthly, the management requirements for foreign exchange risk and investment risk of Qualified Investors’ domestic securities investment are further improved. Sixthly, the PBOC and the SAFE will strengthen the on-going and ex-post supervision.

The total removement of the investment quota limit for Qualified Investors is another major reform measure in the field of foreign exchange management of Qualified Investors. Foreign institutional investors with corresponding qualifications are entitled to remit funds independently to carry out securities, stock index future, foreign exchange derivativesand etc. investment in accordance with the regulations after registration. The convenience for foreign investors to participate in the domestic financial market will be greatly improved again. China’s bond market and stock market will also be accepted by the international market much better and more widely, which will enhance the positivity of foreign investment in China through QFII and RQFII.

Disclaimer: This is an article created by Michael Liang for Chinasdg.org. You can find the original article here: https://chinasdg.org/2020/05/10/china-removes-investment-quotas-of-qfii-and-rqfii/.

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