China scraps foreign invesment cap in stocks, bonds

[BEIJING] China on Tuesday removed limits on foreign institutions wanting to invest in its stocks and bond markets, as it seeks to attract overseas investment amid a slowing economy and a trade spat with the United States.

Foreign individuals are barred from investing directly in China's markets, but the country allows certain institutions to buy shares under the so-called Qualified Foreign Institutional Investor (QFII) scheme.

The State Administration of Foreign Exchange (SAFE) said Tuesday it has removed the overall ceiling of US$300b on total asset purchases under this scheme, offering unfettered access to the world's second-largest capital market.

A cap on a yuan-denominated sister scheme - the Renminbi Qualified Foreign Institutional Investor (RQFII) programme, which allowed overseas institutions to invest in Chinese securities using the offshore yuan - was also removed on Tuesday.

"Foreign institutional investors with the relevant qualifications can remit funds to carry out investment in securities in compliance with regulations, greatly enhancing the convenience for foreign investors participating in the onshore financial market," the regulator said in a statement.

The regulator said it was also seeking permission from China's cabinet to scrap administrative licenses needed by foreign investors to purchase stocks and bonds.

The moves aim to "facilitate foreign investors to invest in the domestic securities market and enhance the depth and breadth of China's financial market opening," said Wang Chunying, a spokeswoman for SAFE.

Just over one-third of the US$300 billion QFII investments quota had been used by end August, according to SAFE data.

Mr Wang said that a yuan-denominated investment scheme, or RQFII programme, will now be open to all overseas institutional investors that meet certain requirements. Earlier it was only available to investors from certain countries or regions on a pilot basis.

China has recently eased restrictions on foreign investment in the financial sector, as the world's second-largest economy fights slowing growth at home and a damaging trade war with the United States.

China will remove shareholding limits on foreign ownership of securities, insurance and fund management firms in 2020, one year earlier than originally planned, the Financial Stability and Development Committee said in July.

Foreign investors will also be encouraged to set up wealth management firms, currency brokerages and pension management companies, the committee said.

Beijing has long promised to further open up its economy to foreign business participation and investment but has generally dragged its feet in implementing the moves.

In November, Beijing made an exception for two European insurers, allowing Germany's Allianz to launch a 100 percent foreign-owned subsidiary, and France's Axa to take control of its joint venture.

And in December, China's securities regulator authorized Swiss bank UBS to take a controlling stake in its local business.

AFP