China will work to speed up approvals of qualified foreign institutional investors looking to buy into its domestic securities, as part of reforms to add depth to the country’s capital markets.
The foreign exchange regulator has already accelerated approvals for long-term foreign investors such as pension funds, raising their initial investment quotas and simplifying procedures after the government last month more than doubled quotas for QFIIs to $80 billion from $30 billion, according to a statement on the State Administration of Foreign Exchange's website yesterday.
Introducing more long-term funds from abroad will help improve market confidence, promote stable growth in China’s capital markets and provide “robust” investment returns to domestic investors, the China Securities Regulatory Commission said in a statement on its website on May 18. The CSRC is mulling amendments to QFII rules to lower entry requirements, broaden the types of investors and relax restrictions on quota and investment scope, the securities regulator said.
“SAFE has been working closely with China Securities Regulatory Commission to facilitate the capital market reforms,” Sun Lujun, head of the capital-account management department at the foreign exchange regulator, said in yesterday’s statement. “We’ll look to speed up the QFII approval process and enlarge the size of investment.”
The benchmark Shanghai Composite Index has dropped 4.6 percent from this year’s high, set on March 2, amid concerns over the country’s slowing economic growth. It has lost nearly two-thirds of its value since its peak in October 2007, a period when Chinese investors widely suffered losses and smaller investors “in general” made no profit, the CSRC said in a Feb. 22 statement.
China has granted $26 billion in QFII quotas for 138 qualified investors as of May 16, according to SAFE. Approvals have reached $4.37 billion so far this year, almost the total for the past two years, it said in yesterday’s statement.
QFIIs had combined profit of 151.6 billion yuan ($23.9 billion) over the past 10 years, the China Securities Journal reported today without saying where it got the information.