China's foreign exchange authority will add about 10 billion U.S. dollars to the investment quotas of qualified foreign institutional investors (QFII) and raise the maximum investment for a single QFII to one billion U.S. dollars from 800 million, Monday's Economic Observer reports.
The final plan for the quota increase is still under discussion by the State Administration of Foreign Exchange (SAFE) and China Securities Regulatory Commission (CSRC), but the new regulating policies on QFII investment are set to be issued, according to the newspaper.
The SAFE has granted investment quotas totaling 9.995 billion U.S. dollars to 49 qualified foreign institutional investors, close to the ceiling of 10 billion U.S. dollars, with only five million U.S. dollars left for the remaining three registered QFIIs.
The Chinese government is considering raising the quota imposed on foreign investment in the RMB-denominated securities business, said Hu Xiaolian, director of SAFE, on the sidelines of the ongoing parliamentary session.
The Chinese government has been very cautious in increasing the QFII investment quotas, as qualified foreign institutional investors have been largely blamed for speculating on RMB appreciation while the domestic capital market is abundant in capital.
Statistics show that the market value of A-shares held by all the qualified foreign institutional investors totals 97.1 billion yuan, making QFIIs the second largest institutional investor after public offerings in the A-share market.
The report says that much of the QFII investment entered the A-share market via A-share funds, the issuance and popularity of which have substantially improved the image of China's capital market.
The Chinese government launched the QFII program in 2003 to allow foreign institutional investors such as UBS and Deutsche Bank to engage in the securities business on the Chinese mainland.
The total investment quota for QFIIs increased from four billion to ten billion U.S. dollars in September 2005.
