The China Banking Regulatory Commission (CBRC) had approved 22 banks as qualified domestic institutional investors (QDIIs) with a total quota of US$14.8 billion, said Yin Long, deputy director general of the CBRC's supervisory cooperation department for banking innovation.

The banks had only "regrettably" invested US$800 million to US$900 million overseas, he told a forum held by the French bank Societe Generale.

"It is not that we discourage overseas investment or the banks are not interested in that business," he said, explaining that overseas investments by QDIIs had been hindered by China's strong stock market and expectations of yuan appreciation.

Market enthusiasm for the QDII scheme launched in July last year had cooled as many investors feared a rising yuan would eat into their investment return, which came only from fixed-income products and money-market products.

After four years in the doldrums, China's stock markets began to rebound at the beginning of 2006, with the benchmark Shanghai Composite Index nearly doubling in a year.

Overseas investment on behalf of clients would become a major business trend for the banking sector because yuan appreciation could not last forever and the domestic stock market would stabilize eventually, he said.

QDIIs are allowed to invest up to 50 percent of their overseas investment in stocks, but stock trading is still restricted to Hong Kong, with a single holding capped at five percent of a product's asset value.

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