China to increase RQFII quota

16  January 2013

Chinese regulators are planning to continually ease investment restrictions for RQFII, or renminbi-Qualified Foreign Institutional Investors, and raise the quota to channel more domestic currency into the mainland securities market, the China Securities Regulatory Commission said.

RQFII are investors allowed to invest renminbi funds raised in Hong Kong in securities in China.

The commission will coordinate with the central bank and the State Administration of Foreign Exchange to work out an amendment draft of the RQFII regulations, aiming to allow more financial institutions in Hong Kong to apply for the quota, an official from the CSRC said.

“Those financial institutions may be allowed to invest more in equity products, while the limitation of the investment proportion on fixed-income instruments is likely to be eased,” he added.

The CSRC is also communicating with Hong Kong regulators to encourage Exchange Traded Fund transactions.

Until September, 21 RQFIIs had a total quota of 39 billion yuan ($6.24 billion), according to the SAFE. The CSRC enlarged the RQFII quota to 70 billion yuan in April from 20 billion yuan.