China removes QFII cap on sovereigns, central banks

In May, the Chinese government was said to be in favor of providing larger quotas to long-term investors and would consider lowering the capital threshold for applicants. At that time, the maximum for individual institutional quotas was $1 billion, up from $800 million in 2009.

Although the $1 billion cap has been removed for sovereigns, central banks and monetary authorities, such funds are not allowed to re-up their quotas within a year after their previous application, SAFE said in a statement.

The overall QFII quota, which increased to $80 million from $50 million in April, is unchanged. Foreign investment under the program still accounts for a mere 1.1% of total A-share market capitalization.

Since QFII started in 2002, the regulator had granted $36 billion in quotas to 165 investors as of November. Sovereign wealth funds and central banks including the Hong Kong Monetary Authority, Qatar Holdings, Government of Singapore Investment Corporation (GIC), Temasek Holdings and Norges Bank Investment Management, have already been approved to invest up to $1 billion each.

To further open up and liberalize China's capital markets, private equity firms have also been allowed to apply for QFII licenses. Foreign PE firms can participate under the category of asset management institutions.

According to amendments outlined in June, asset management institutions, insurers and other institutional investors including pension funds must have at least $500 million under management to participate in QFII, down from $5 billion. Brokerages and commercial banks can qualify if they have $5 billion in assets, compared to the previous threshold of $10 billion.

The regulator has also increased the maximum stake a QFII can own in a Chinese listed company from 20% to 30%.

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• Topics
• Greater China
• Regulation
• China
• regulation