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How to invest in China

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  • What is QFII?

    China’s equity markets were previously closed to foreign investors due to China’s exercise of tight capital controls which restricted the asset inflow and outflow. The Qualified Foreign Institutional Investor (QFII) scheme allows foreign access to China’s equity markets with restrictions on investment ratio, quota, targets and capital remittance controls.

    QFII was first initiated as a pilot program in 2002 by the People’s Bank of China (PBoC) and the China Securities Regulatory Commission (CSRC), and then was promulgated in 2006 under the “Measures on the Administration of Securities Investments in China by Qualified Foreign Institutional Investors”. QFII refers to foreign fund management institutions, insurance companies, securities firms and other asset management institutions which satisfy the relevant statutory requirements, which are approved by the CSRC for making investments in the China securities market and have obtained a quota granted by the State Administration of Foreign Exchange (SAFE).

    Candidates for QFII must have stable finance, good credibility and meet the minimum asset scale set by CSRC. The number of staff must also meet the requirements set by the relevant authority in its own country or area, and a sound governing structure and internal control systems must be in place with no significant misdemeanours in the candidate’s home country. A complete legal and supervision system must be in place in its home country or home area and a Memorandum of Understanding (MOU) with CSRC must have been signed along with an effective supervision cooperation. The CSRC also has other requirements based on prudence.

  • What is RQFII?

    During his visit to Hong Kong in August 2011, Vice Premier Li Keqiang unveiled a series of policy initiatives that use Hong Kong as the platform to further the RMB’s liberalisation and capital market opening goals. Renminbi Qualified Foreign Institutional Investors (RQFII) is one of these initiatives.

    RQFII helps opening up China’s capital market to foreign investment and accelerating the RMB internationalisation process as China implements foreign exchange control and the RMB is not freely convertible. It was launched by the PBoC, CSRC and SAFE on 16 December 2011 to allow the Hong Kong subsidiaries of China fund managers and brokers to repatriate their existing offshore RMB pools through a quota process and then invest in onshore China markets. The initial quota size is RMB20 billion (USD3.2 billion) of which 80% will be invested in fixed-income and 20% in equities. More importantly, RQFII investors are eligible to invest in the inter-bank bond market on top of the exchange-traded bond market, which is much larger in size and trading volume.

  • What are the differences between QFII and RQFII?
      QFII RQFII
    Based currency USD RMB
    Application procedure
    • CSRC to approve licence
    • SAFE to approve quota
    • CSRC to approve licence
    • SAFE to approve quota
    • PBoC to approve the inter-bank bond market participation qualification
    Qualifications and Criteria Strict requirements on asset management experience, AUM and firm capital
    • Active asset management licence in Hong Kong
    • Experience in managing client assets
    • Hong Kong domiciled and SFC authorized fund
    Validity of the approved quota Required to fulfill the quota within 6 months after approval N/A
    Lock-up period
    • 3 months for insurance, government, mutual fund, pension fund, charity fund, endowment, foundation and China open-ended fund
    • 1 year for others
    N/A
    Liquidity Monthly Daily
    Target investors Institutional investor Retail investor mainly
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