China relaxes QFII rules to include private equity

Foreign PE firms will participate under the category of asset management institutions.

The China Securities Regulatory Commission (CSRC) opened up QFII to private equity investors as it lowered the minimum qualification requirement and simplified the approval process for all applicants.

According to amendments outlined Friday, 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%.

Foreign investment made under the QFII program currently accounts for 1.1% of total A-share market capitalization. The government is keen to raise this level and increased the overall QFII quota by $50 billion to $80 billion in April. At that time, the CSRC was said to be in favor of providing larger quotas to attract long-term investors.

A draft version of the new rules was release for public comment last month and the CSRC received 28 submissions, state media reported. Since December 2011, the regulator has granted $5.6 billion in quotas to 51 QFIIs. More than 170 foreign investors have received licenses since the program started in 2002.

The CSRC said it will continue to speed up QFII approvals and also clarify tax issues concerning the program as soon as possible.

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• Topics
• Greater China
• Regulation
• China
• CSRC
• regulation