China Said to Scrap Foreign Allocation Limits to Lure Investors

  • CSRC previously asked QFIIs to put at least 50% into stocks
  • Change follows a series of market opening measures this year

Chinese authorities have scrapped guidelines on Qualified Foreign Institutional Investors’ mainland asset allocations, according to people familiar with the matter.

The China Securities Regulatory Commission has told market participants that it no longer requires overseas investors to put at least 50 percent of their assets into stocks, the people said. The regulator may not make a public announcement as the previous limits were not official policy, said the people, who asked not to be named as the information is private. A CSRC press official declined to comment.

“It’s not surprising that the CSRC is scrapping such limits to facilitate inflows, as frankly we don’t see much interest now from offshore investors to put money onshore,” said Carol Pang, vice president for fixed income, currency and commodities at Zhongtai International Holdings Ltd. in Hong Kong. “Given the various new channels through which they can invest, the old limits would have also been difficult to control.”

China has this year relaxed some capital controls to grant foreign investors easier access to its domestic market. Regulators in February opened the nation’s interbank bond market to all long-term investors, and said QFIIs no longer need to apply for quotas, linking the cap on their onshore investments to their assets under management. 

Quotas for renminbi QFII, which enables offshore yuan to be used to purchase stocks and bonds in China’s onshore markets, were eased earlier this month. A second stock link to Hong Kong, from the mainland city of Shenzhen, is expected to launch in November, further opening up the country to overseas money.

The moves come after MSCI Inc. declined to include China’s equity markets into its indexes for a third time. In explaining its June 14 decision denying China, MSCI cited the need for additional improvements in the accessibility to the mainland market.

— With assistance by Gary Gao, Helen Sun, and Steven Yang

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