China’s Central Government Opens Up its Capital Market

China’s Central Government Opens Up its Capital Market

China’s Central Government Opens Up its Capital Market

The volume of approved foreign institutional capital investing in China’s capital market picked up in October thanks to more opening-up policies.

The accumulated volume of the approved Qualified Foreign Institutional Investors (QFII) program grew by US$2.7-B in October to reach about US$84.4-B as of 27 October. The increase was US$258-M from August to September, according to data released by the country’s foreign exchange watchdog Friday.

Meanwhile, the RMB Yuan denominated Qualified Foreign Institutional Investors (RQFII) program saw its accumulated volume increase by CNY 3.65-B (about US$538-M) this month, compared with an increase of CNY 998-M from August to September.

The acceleration of the volume of QFII and RQFII programs has been attributed to recent decisions by the central government to further open up its capital market.

China’s securities regulator decided in late September to remove asset allocation restrictions on qualified foreign investors to allow them greater freedom to invest.

Previously, China required overseas investors to invest at least 50% of their assets into stocks, and their cash ratio should not exceed 20%.

To gradually open the capital account, the government introduced the QFII and RQFII programs in Y’s 2002 and 2011. They give foreign investors the right to move money into the account to encourage controllable flows.

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