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China Mulls Trial Program for Individuals Investing Overseas

Jan. 12 (Bloomberg) -- China has started preparations for a trial program that would allow individuals to invest in overseas capital markets as the nation seeks a greater role for its currency in global finance.

The People’s Bank of China will proactively prepare for the trial of its qualified domestic individual investor program, it said in a statement on its website yesterday, without giving further details. The central bank lists the so-called QDII2 initiative as one of its major goals for 2013.

China is seeking to reduce its reliance on the dollar after accumulating $3.31 trillion of foreign-exchange reserves, the world’s largest stockpile. The country’s foreign-exchange regulator said in April that it will gradually open more channels for capital outflows and relax restrictions on residents’ overseas investments, as it seeks to make the yuan a fully convertible currency.

The government started the QDII program in 2006, allowing Chinese individuals to buy securities in overseas markets through asset managers and funds. A total of $85.6 billion in quotas were awarded to 107 institutions, including Bank of China Ltd. and HSBC (Bank) China Co., as of Dec. 31, according to the State Administration of Foreign Exchange.

In August 2007, China unveiled a so-called “through-train” program, in which citizens could invest directly in Hong Kong stocks, and helped push the benchmark Hang Seng Index to a record high that October. The State Administration of Foreign Exchange said in January 2010 it scrapped the plan and instead expanded the QDII system for investment overseas.

Hong Kong’s Hang Seng Index fell 0.4 percent yesterday to 23,264.07. It reached a record 31,638.22 on Oct. 30, 2007.

To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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