China relaxes QFII rules to attract overseas investment

BEIJING -- China has eased its grip on its control on investments made by qualified foreign institutional investors (QFIIs), according to a revised QFII regulation released by the nation's securities regulator.

Compared with previous rules, the regulation published by the China Securities Regulatory Commission (CSRC) on Friday lowers the QFII threshold and allows QFIIs to invest in the nation's capital market through more than one securities dealer.

The regulation also allows QFIIs to invest in the interbank bond market and private placement bonds issued by small and medium-sized enterprises and hold up to a 30-percent stake in a listed company, up from the previous 20-percent stake cap.

The move aims to make it easier for QFIIs to invest in China's capital market, part of the nation's efforts to free up capital flows and accelerate the opening of domestic capital markets.

The CSRC said it received 28 submissions after opening draft rules to solicit public opinion from June 20 to July 5, and the commission has made adjustments accordingly.

The CSRC said it will continue to speed up the approval of QFIIs, facilitate the operation of the QFII scheme with related authorities and strengthen supervision to attract more long-term overseas investments.

The CSRC has quickened QFII approvals lately, granting $5.62 billion in quotas to 51 QFIIs since December 2011.

The State Council, China's Cabinet, in April increased total QFII quotas to $80 billion from the previous $30 billion.

The CSRC has granted QFII licenses to 172 foreign investors since the program started in 2002.

Foreign investment under the QFII program accounts for 1.1 percent of the total market value of the country's A-shares.