Opportunities with the latest QFII & RQFII policy changes

The Qualified Foreign Institutional Investors (QFII) and RMB Qualified Foreign Institutional Investors (RQFII) are China’s two main inbound investment schemes introduced in 2002 and 2011 respectively to encourage foreign participation in its financial markets.  QFII and RQFII provide attractive conduits for foreign institutional investors seeking exposure to Chinese capital markets, with over 500 approved global investors to date, since the implementation of the schemes.

 

Through the years, the schemes had seen various changes. Earlier this year in May 2020, there was a round of policy changes to clarify and simplify the management requirements for domestic securities and futures investment capital of foreign institutional investors, to read more on that click here.

 

The latest policy changes, jointly announced by China Securities Regulatory Commission (CSRC), People’s Bank of China (PBC), and State Administration of Foreign Exchange (SAFE) on 25 September 2020, serve to further open up China’s capital markets. The changes will be effective from 1 November 2020.

 

 

Major revisions to previous QFII and RQFII rules are as follows.

1. Relaxation of qualification requirements and facilitation of investment and operations.

• Integration of the QFII and RQFII qualifications and rules with a relaxation of qualification requirements;
• Streamlining of application documents;
• Simplified review procedure which shortens the review cycle to 10 business days;
• Removal of the restriction on the number of intermediaries servicing a QFII or RQFII;
• Improved supervision over the reporting and filing of QFIIs and RQFIIs;
• Reduction of requirements for data submission.

 

2. Expansion of investment scope.

With effect from 1 November 2020, the permissible investments for QFII and RQFII are further increased.

(Please note the specific products and trading types of financial futures, commodity futures and options that a QFII can participate in shall be subject to the approval of CSRC submitted by securities and futures exchange.)

 

Current investments allowed

Additional asset types from 1 November

Stocks, bonds and warrants traded on the Shanghai or Shenzhen stock exchange Fixed income products traded in China’s inter-bank bond market Securities investment funds (mutual funds) Stock index futures Other financial instruments as approved by the CSRC New issuance of shares and convertible bonds, further issuance of shares and subscriptions under rights issues.

Securities admitted on the National Equities Exchange and Quotations (NEEQ) market Private investment funds Financial futures contracts listed and traded on the China Financial Futures Exchange (CFFEX); Commodity futures contracts listed and traded on futures exchanges with approval of the CSRC; Options listed and traded on exchanges with approval of the State Council or the CSRC; Other financial instruments as approved by the CSRC Foreign exchange derivatives traded for hedging purposes Financial products including financial derivatives contracts and related trading models will be gradually relaxed in an orderly manner (which is to be announced by the CSRC upon agreement with the PBC and the SAFE). Other permissible activities include bond repurchase transactions, margin trading and securities financing on stock exchanges, and securities lending to securities finance company.

 

 

3. Enhancing ongoing supervision.

Cross-market surveillance, cross-border supervision and see-through regulation are enhanced.

 

 

The policy changes and investor-friendly reforms continue the trend of the Chinese Government which welcomes medium to long term overseas funds into the Chinese capital market. Offshore financial institutions and fund managers can make use of the system to steadily increase their holdings of onshore assets, and better leverage on the opportunities to increase their overall China capital markets exposure. Chinese regulators are committed to continual market liberalization and the two-way opening-up of Chinese domestic capital markets at a higher level.

 

Given that China is the world’s second-biggest economy, now is the time for foreign investors to ‘strike the iron while its hot’. Our specialist team is well-able to provide insights to help investors navigate through China’s Capital Markets, feel free to reach out to us today.

 

Orient Futures International (Singapore) Pte. Ltd. (Orient Futures Singapore) is the global subsidiary of Orient Futures, offering brokerage services to a suite of capital market products including Exchange Traded Derivatives, OCT Derivatives and Leveraged Foreign Exchange Trading. Orient Futures is a China based company engaged in commodities futures brokerage, financial futures brokerage, futures investment consulting, asset management business and fund sales. Based in China, serving the world, we provide one-stop service for domestic and international institutional investors to take part in the China futures market. Our team provides professional services to domestic and international clients seeking to participate in the growing China market.