China grants quotas under outbound investment scheme QDII after 10-month hiatus

CHINA’S foreign exchange regulator granted fresh quotas under outbound investment scheme QDII for the first time in 10 months in May, as a fragile domestic economy drives demand for foreign assets.

But the small increase of quotas under the Qualified Domestic Institutional Investor (QDII) programme – totalling just US$2.27 billion – reflects regulators’ caution that additional money outflows could further pressure a weakening yuan.

At the end of May, QDII quotas totalled US$167.79 billion, the State Administration of Foreign Exchange (SAFE) said in a statement late on Friday (May 31). That compares with US$165.52 billion a month earlier.

SAFE, which implements strict capital controls, last granted QDII quotas in July.

Chinese investors are keen to invest overseas, thanks to a wobbly domestic economy and the yawning gap with US yields.

The new quotas in May, spread among roughly 40 institutions, are like sprinkles that cannot meet investors’ demand, said a QDII fund manager who is not authorised to speak to media. REUTERS