Keywords: CSRC, China Securities Regulatory Commission, QFII, Investors,

Overview

The China Securities Regulatory Commission (CSRC) issued the Rules on Issues Concerning Implementation of the Measures for Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors (the Implementing Rules) on 27 July 2012.

The Implementing Rules:

  • lower the track record and assets under management requirements for applicants
  • allow QFIIs to invest via more than one securities dealer
  • allow QFIIs to invest in the interbank bond market and in private placement bonds issued by small and medium-sized enterprises
  • raise the ceiling on the combined stakeholding of QFIIs in any A share company to 30% from 20%

Background

Since the CSRC and the People's Bank of China (PBOC) jointly issued the QFII Measures in 2002, a number of measures have been launched to attract QFIIs including:

  • increasing the aggregate amount of quotas to US$80 billion
  • more convenience in opening required foreign exchange accounts
  • reducing lock-up periods with respect to investments made
  • relaxing restrictions on inward and outward fund flows

For more background information, please refer to our Legal Update: China's New QFII Regulations Released and China's QFII Scheme Gets Underway - an article written by Phill Smith for The Hong Kong Accountant.

While a total of 172 QFIIs had been approved by the end of May 2012, the QFII's market share accounted for only 1.1% of the total market capitalisation of A-shares as at the same date.

The regulators have therefore recognised the need to introduce additional measures to attract QFIIs.

Major changes under the Implementing Rules

The Implementing Rules replace the 2006 version of the Rules (the 2006 Rules).

Major changes introduced by the Implementing Rules are summarised in the table below.

Previously published on 13 August 2012.

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