Investor schemes play an important role
By Yi Xianrong (China Daily)Updated: 2006-12-08 14:12
Monday marks the fifth anniversary of China's entry to the World Trade
Organization (WTO), and the end of the five-year transition
period.
Besides an economic boom, China has seen reform and development
of its financial market, which is likely to decide the track of the economy in
coming years and the degree of China's integration with the rest of the
world.
The end of the transition period also means the country is
entering the final phase of switching to a free-market economy and that the
reform of the capital market may continue with greater force.
The capital
market has been dramatically reshaped during the last decade. The B-share market
was established, domestic enterprises were allowed to list overseas, foreign
investors were permitted to merge with listed companies after they released
untradable shares held by the State.
On top of that, the authorities
established two schemes qualified foreign institutional investors (QFII) and
qualified domestic institutional investors (QDII).
The two schemes are
not part of China's commitment to the WTO, but they will probably become the
most important tools for promoting the opening-up of the capital market before
the country fully opens its capital account.
The QFII scheme formally
came into effect on December 1, 2002 under approval from the China Securities
Regulatory Commission (CSRC), the People's Bank of China (PBOC) and the State
Administration of Foreign Exchange (SAFE). Fifty-one overseas institutions have
already gained QFII qualification and 41 of them have been granted an investment
quota of US$8.25 billion.
On April 13, 2006, the PBOC and the SAFE
announced that Chinese qualified institutional investors including banks, fund
management companies and insurance firms would be allowed to invest outside
China, under given quotas, with the money pooled from their individual
clients.
Over 10 financial bodies have been granted QDII status,
including Citibank, the China Construction Bank, the Hong Kong and Shanghai
Banking Corporation and Bank of China.
Banks holding the QDII licence
were granted a total of US$11.1 billion in quotas for overseas investment by the
end of September.
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