Qualified Foreign Institutional Investor

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The Qualified Foreign Institutional Investor program, one of the first efforts to internationalize the RMB, represents China’s effort to allow, on a selective basis, global institutional investors to invest in its RMB denominated capital market.[1] Once licensed, foreign investors are permitted to buy RMB-denominated “A shares" in China's mainland Shanghai and Shenzen stock exchanges.[2] Thus foreign investors benefit from an opportunity to invest onshore, which is otherwise often insulated from the rest of the world, and subject to capital controls governing the movement of assets in-and-out of the country.[3]

Development[edit]

The program has been in operation for over a decade, and quotas allocating RMB under licenses have expanded steadily. By the end of April 2011, 103 licenced QFII investors had been granted a combined quota of $20.7 billion to invest in China's capital markets under the QFII program, UBS AG currently holds the greatest single share of quota. Foreign access to China's yuan-denominated "A" stocks are still limited, with quotas placed under the QFII program amounting to US$30 billion.[4]

In April, 2012, the Qualified Foreign investment quota was increased from US$30 billion to US$80 billion. Before the increase, the overall value of approved QFII and RQFII (offshore Renminbi QFII[5]) funds was only 0.8% of total market capitalization and only US$25 billion of the US$30 billion quota was used. While aspects of the increased quota seem likely to take business from Hong Kong, a pilot program in Wenzhou for domestic investors to invest abroad was considered a possible offset for the financial center.[6] The QFII expansion was also followed quickly by the "approval of new ETF products that will be denominated in offshore yuan (CNH) but will trade on the Hong Kong Stock Exchange".[7]

China granted $910 million worth of investment quotas to 11 foreign institutional investors in March 2013 The quotas, under the Qualified Foreign Institutional Investor (QFII) scheme, were awarded to overseas institutions including Generali Fund Management S.A, IDG Capital Management (HK) Ltd and Cutwater Investor Services Corp. By the end of March 2013, China had awarded a combined $41.745 billion of QFII quotas to 197 foreign institutions.[8]

By the end of February 2014, the total quotas issued under the QFII programme to $52.3 billion as of Feb. 28 from $51.4 billion at the end of December, and to 180.4 billion yuan ($29.44 billion) from 167.8 billion yuan under the RQFII programme, according to data by the Chinese agency, SAFE[9]

Background[edit]

Regulations of the QFII program were based on "Temporary Regulation on Domestic Securities Investment by Qualified Foreign Institutional Investor" (合格境外机构投资者境内证券投资管理暂行办法), which was publicized on 5th Nov 2002 and ceased to be in effect on 1st Sep 2006, and "Regulation on Domestic Securities Investment by Qualified Foreign Institutional Investor"(合格境外机构投资者境内证券投资管理办法), which is publicized on 24th Aug 2006, and came into effect on 1st Sep 2006.[10]

Pursuant to "Regulation on Domestic Securities Investment by Qualified Foreign Institutional Investor",to qualify as a QFII, the candidate must:

  • have stable finance, good credibility, meet the minimum asset scale set by China Securities Regulatory Commission (CSRC);
  • the number of staffs meet the requirement set by the authority in its own country or area;
  • has healthy governing structure and complete internal control system, received no significant punishment in the last 3 years;
  • candidate's home country has complete legal and supervision system, and its home country or home area has signed Memorandum of Understanding(MOU) with CSRC, and maintains effective supervision cooperation;
  • other requirements set by CSRC based on prudence.
Custody banks

QFII Qualification Statistics[edit]

No. Name of QFII Qualification approved date
1 UBS AG May 23, 2003
2 Nomura Securities Co., Ltd. May 23, 2003
3 Morgan Stanley & Co. International Limited June 5, 2003
4 Citigroup Global Markets Limited June 5, 2003
5 Goldman, Sachs & Co. July 4, 2003
6 Deutsche Bank AG or Deutsche Bank Aktiengesellschaft July 30, 2003
7 The Hongkong and Shanghai Banking Corporation Limited August 4, 2003
8 ING Bank N.V. September 10, 2003
9 JPMorgan Chase Bank September 30, 2003
10 Credit Suisse (HongKong) Limited October 24, 2003
11 Standard Chartered Bank (HongKong) Limited December 11, 2003
12 Nikko Asset Management Co., Ltd. December 11, 2003
13 Merrill Lynch International April 30, 2004
14 Hang Seng Bank May 10, 2004
15 Daiwa Securities SMBC Co., Ltd. May 10, 2004
16 Lehman Brothers International (Europe) July 6, 2004
17 Bill & Melinda Gates Foundation July 19, 2004
18 INVESCO Asset Management Limited August 4, 2004
19 ABN AMRO Bank N.V. September 2, 2004
20 Société Générale September 2, 2004
21 Templeton Asset Management Ltd. September 14, 2004
22 Barclays Bank PLC September 15, 2004
23 Dresdner Bank Aktiengesellschaft September 27, 2004
24 Fortis Bank SA/NV September 29, 2004
25 BNP Paribas September 29, 2004
26 Power Corporation of Canada October 15, 2004
27 Calyon S.A. October 15, 2004
28 Goldman Sachs Asset Management International May 9, 2005
29 Martin Currie Investment Management Ltd. October 25, 2005
30 Government of Singapore Investment Corporation Pte. Ltd. October 25, 2005
31 AIG Global Investment Corp. November 14, 2005
32 Temasek Fullerton Alpha Investments Pte. Ltd. November 15, 2005
33 JF Asset Management Limited December 28, 2005
34 The Dai-ichi Mutual Life Insurance Company December 28, 2005
35 DBS Bank Ltd. February 13, 2006
36 AMP Capital Investors Ltd. April 10, 2006
37 Scotiabank or The Bank of Nova Scotia April 10, 2006
38 KBC Financial Products UK Limited April 10, 2006
39 La Compagnie Financière Edmond de Rothschild Banque April 10, 2006
40 Yale University April 14, 2006
41 Morgan Stanley Investment Management Inc. July 7, 2006
42 Prudential Asset Management (Hongkong) Limited July 7, 2006
43 Stanford University August 5, 2006
44 GE Asset Management Incorporated August 5, 2006
45 United Overseas Bank Limited August 5, 2006
46 Schroder Investment Management Limited August 29, 2006
47 HSBC Investments (Hongkong) Limited September 5, 2006
48 Shinko Securities Co., Ltd. September 5, 2006
49 UBS Global Asset Management (Singapore) Ltd. September 25, 2006
50 Sumitomo Mitsui Asset Management Company, Limited September 25, 2006
51 Norges Bank October 24, 2006
52 Pictet Asset Management Limited October 25, 2006
53 The Trustees of Columbia University in the City of New York March 12, 2008
54 Prudential Asset Management Co., Ltd. April 7, 2008
55 Robeco Institutional Asset Management B.V. May 5, 2008
56 State Street Global Advisors Asia Limited May 16, 2008
57 Platinum Investment Company Limited June 2, 2008
58 KBC Asset Management N.V. June 2, 2008
59 Mirae Asset Investment Management Co., Ltd. July 25, 2008
60 ACE INA International Holdings, Ltd. 2008.8.5
61 Caisse de dépôt et placement du Québec 2008.8.22
62 President and Fellows of Harvard College 2008.8.22
63 Samsung Investment Trust Management Co., Ltd. 2008.8.25
64 AllianceBernstein Limited 2008.8.28
65 Oversea Chinese Banking Corporation Limited 2008.8.28
66 First State Investment Management (UK) Limited 2008.9.11
67 DAIWA Asset Management Co. 2008.9.11
68 Shell Asset Management Company B.V. 2008.9.12
69 T. Rowe Price International, Inc. 2008.9.12
70 EARNEST Partners, LLC January 9, 2012
71 Korea Investment Management Co., Ltd. July, 2012
Reference: www.csrc.gov.cn/;www.china-xbr.com/

References[edit]

  1. ^ Zhao, Samuel. "A Guide to the Qualified Foreign Institutional Investors Scheme for Navigating Investment into China". https://www.bbh.com/wps/wcm/connect/0545b8804ea33036983edb2be2b7957f/ISM_QFII_GlobalView_Reprint_Single+Page.pdf?MOD=AJPERES&CACHEID=0545b8804ea33036983edb2be2b7957f. 
  2. ^ Zhao, Samuel. "A Guide to the Qualified Foreign Institutional Investors Scheme for Navigating Investment into China". https://www.bbh.com/wps/wcm/connect/0545b8804ea33036983edb2be2b7957f/ISM_QFII_GlobalView_Reprint_Single+Page.pdf?MOD=AJPERES&CACHEID=0545b8804ea33036983edb2be2b7957f. 
  3. ^ China further loosens its capital controls - International Herald Tribune (August 20, 2007). Retrieved on January 21, 2009.
  4. ^ Legg Mason Seeks China License to Trade Yuan-Denominated Stocks - Bloomberg (March 10, 2009). Retrieved on March 10, 2009.
  5. ^ Chiu, Jeckle, et al. "New RQFII Rules Announced: New Ways to Use Offshore RMB - Part II", Mayer Brown (law firm) web post, 4 January 2012. Retrieved 2012-04-10.
  6. ^ Stephen, Craig, "China’s welcome mat for foreign investors", MarketWatch, April 8, 2012. Retrieved 2012-04-10.
  7. ^ Sweeney, Pete, "China approves new yuan ETFs in Hong Kong", Reuters, April 19, 2012. Retrieved 2012-04-19.
  8. ^ http://www.reuters.com/article/2013/04/09/china-investment-qfii-idUSL3N0CI10A20130409
  9. ^ "UPDATE 1-China raises foreign institutional investor quota by $3 bln in Feb". http://www.reuters.com/article/2014/02/28/china-investment-qfii-idUSL3N0LX35X20140228. 
  10. ^ 合格境外机构投资者境内证券投资管理办法, xinhuanet.com, 2006年08月26日.

External links[edit]