China’s Forex Regulator Mulls Reform of QDII Program

China’s Forex Regulator Mulls Reform of QDII Program

Xu Yanyan

Date: Thu, 04/12/2018 - 15:15 / source:Yicai
China’s Forex Regulator Mulls Reform of QDII Program
China’s Forex Regulator Mulls Reform of QDII Program

(Yicai Global) April 12 -- China’s foreign exchange regulator is mulling changes to its Qualified Domestic Institutional Investor scheme as the nation continues to open up its capital market to the rest of the world.

The State Administration of Foreign Exchange will advance the QDII program to better meet the cross-border asset allocation needs of domestic investors, it said in a statement yesterday. The changes consider the value of assets managed by QDII institutions, internal control compliance and other factors. The QDII program allows domestic institutions to invest in offshore securities and bonds under limited conditions in markets where capital accounts have not yet been fully liberalized.

The USD90-billion quota for QDII investment has been maxed out for since March 2015. As of March 29, 2018, there had been a total USD89.99 billion granted to QDII institutions, including 30 banks, 48 securities firms, 40 insurers and 14 trusts, data from SAFE’s website shows.

Chinese investors don’t hold a large portion of their assets overseas at the moment, Yi Gang, governor of the central bank, said at the Boao forum yesterday. As the country continues to open up, Chinese residents and institutions should be able to invest more abroad, he added, saying that with demand from both domestic and foreign investors, cross-border capital flow can be done smoothly and efficiently.

China's capital exodus has calmed and forex reserves have risen since February last year, as the yuan began to stabilize against the dollar. Reserves tallied USD3.14 trillion as of the end of March 2018, up USD8.3 billion (0.27 percent) from February, and expectations of the yuan’s depreciation against the greenback have diminished.

“This year marks the 40th anniversary of China’s reform and opening up,” Xie Wei, vice present at Bank of Communications Schroder Fund Management Co., told Yicai Global. “Further relaxation of cross-border investment shows China’s determination to promote reform through openness, which paves the way for China to further open up its financial sector.”

Copy-edited by James Boynton

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Keywords: QDII, SAFE, Forex, overseas investment