Qualified Foreign Institutional Investor

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 Shenzhen 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

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 licensed 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

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

No.Name of QFIIQualification approved date Country of domicile Custodian bank Approved Quota
1UBS AGMay 23, 2003
2Nomura Securities Co., Ltd.May 23, 2003
3Morgan Stanley & Co. International LimitedJune 5, 2003
4Citigroup Global Markets LimitedJune 5, 2003
5Goldman, Sachs & Co.July 4, 2003
6Deutsche Bank AG or Deutsche Bank AktiengesellschaftJuly 30, 2003
7The Hongkong and Shanghai Banking Corporation LimitedAugust 4, 2003
8ING Bank N.V.September 10, 2003
9JPMorgan Chase BankSeptember 30, 2003
10Credit Suisse (HongKong) LimitedOctober 24, 2003
11Standard Chartered Bank (HongKong) LimitedDecember 11, 2003
12Nikko Asset Management Co., Ltd.December 11, 2003
13Merrill Lynch InternationalApril 30, 2004
14Hang Seng BankMay 10, 2004
15Daiwa Securities SMBC Co., Ltd.May 10, 2004
16Lehman Brothers International (Europe)July 6, 2004
17Bill & Melinda Gates FoundationJuly 19, 2004
18INVESCO Asset Management LimitedAugust 4, 2004
19ABN AMRO Bank N.V.September 2, 2004
20Société GénéraleSeptember 2, 2004
21Templeton Asset Management Ltd.September 14, 2004
22Barclays Bank PLCSeptember 15, 2004
23Dresdner Bank AktiengesellschaftSeptember 27, 2004
24Fortis Bank SA/NVSeptember 29, 2004
25BNP ParibasSeptember 29, 2004
26Power Corporation of CanadaOctober 15, 2004
27Calyon S.A.October 15, 2004
28Goldman Sachs Asset Management InternationalMay 9, 2005
29Martin Currie Investment Management Ltd.October 25, 2005
30Government of Singapore Investment Corporation Pte. Ltd.October 25, 2005
31AIG Global Investment Corp.November 14, 2005
32Temasek Fullerton Alpha Investments Pte. Ltd.November 15, 2005
33JF Asset Management LimitedDecember 28, 2005
34The Dai-ichi Mutual Life Insurance CompanyDecember 28, 2005
35DBS Bank Ltd.February 13, 2006
36AMP Capital Investors Ltd.April 10, 2006
37Scotiabank or The Bank of Nova ScotiaApril 10, 2006
38KBC Financial Products UK LimitedApril 10, 2006
39La Compagnie Financière Edmond de Rothschild BanqueApril 10, 2006
40Yale UniversityApril 14, 2006
41Morgan Stanley Investment Management Inc.July 7, 2006
42Prudential Asset Management (Hongkong) LimitedJuly 7, 2006
43Stanford UniversityAugust 5, 2006
44GE Asset Management IncorporatedAugust 5, 2006
45United Overseas Bank LimitedAugust 5, 2006
46Schroder Investment Management LimitedAugust 29, 2006
47HSBC Investments (Hongkong) LimitedSeptember 5, 2006
48Shinko Securities Co., Ltd.September 5, 2006
49UBS Global Asset Management (Singapore) Ltd.September 25, 2006
50Sumitomo Mitsui Asset Management Company, LimitedSeptember 25, 2006
51Norges BankOctober 24, 2006
52Pictet Asset Management LimitedOctober 25, 2006
53The Trustees of Columbia University in the City of New YorkMarch 12, 2008
54Prudential Asset Management Co., Ltd.April 7, 2008
55Robeco Institutional Asset Management B.V.May 5, 2008
56State Street Global Advisors Asia LimitedMay 16, 2008
57Platinum Investment Company LimitedJune 2, 2008
58KBC Asset Management N.V.June 2, 2008
59Mirae Asset Investment Management Co., Ltd.July 25, 2008
60ACE INA International Holdings, Ltd.2008.8.5
61Caisse de dépôt et placement du Québec2008.8.22
62President and Fellows of Harvard College2008.8.22
63Samsung Investment Trust Management Co., Ltd.2008.8.25
64AllianceBernstein Limited2008.8.28
65Oversea Chinese Banking Corporation Limited2008.8.28
66First State Investment Management (UK) Limited2008.9.11
67DAIWA Asset Management Co.2008.9.11
68Shell Asset Management Company B.V.2008.9.12
69T. Rowe Price International, Inc.2008.9.12
70EARNEST Partners, LLC12/13/2011
71Korea Investment Corporation12/28/2011
72 Russell Investments Ireland Limited 12/28/2011
73 Metzler Asset Management GmbH 12/31/2011
74 HI Asset Management Co., Linmited. 12/31/2011
75 Shinhan BNP Paribas Asset Management Co., Ltd. 1/5/2012
Stichting Pensioenfonds voor Huisartsen 1/5/2012
National Pension Service 1/5/2012
Mercuries Life Insurance Co, Ltd 1/30/2012
Prudential Financial Securities Investment Trust Enterprise 1/31/2012
Principal Global Investors LLC 1/31/2012
Hospital Authority Provident Fund Scheme 1/31/2012
TransGlobe Life Insurance Inc. 2/3/2012
Public Mutual Berhad 2/3/2012
Meiji Yasuda Asset Management Company Ltd. 2/27/2012
Cathay Life Insurance Co., LTD. 2/28/2012
Sumitomo Mitsui Banking Corporation 2/28/2012
Fubon Life Insurance Co. Ltd 3/1/2012
American International Assurance Company,Limited 3/5/2012
Neuberger Berman Europe Limited 3/5/2012
KHAZANAH NASIONAL BERHAD 3/7/2012
Capital Research and Management Company 3/9/2012
Tokio Marine Asset Management Co., Ltd 3/14/2012
Hana Daetoo Securities Co, Ltd 3/29/2012
Genesis Asset Managers, LLP 3/30/2012
City of London Investment Managementi Company Limited 3/30/2012
JPMorgan Asset Management (UK) Limited 3/30/2012
Okasan Asset Management Co., Ltd 3/30/2012
Prescient Investment Management PTY LTD 4/18/2012
Dongbu Asset Management Co., Ltd. 4/20/2012
Janus Capital Managemente LLC 4/20/2012
Mizuho Asset Management Co., Ltd. 4/26/2012
Henderson Global Investors Limited 4/28/2012
Eurizon Capital S.A. 5/2/2012
BOCI-Prudential Asset Management Limited 5/3/2012
Fullerton Fund Management Company Ltd 5/4/2012
Lion Global Investors Limited 5/7/2012
GENERAIL Fund Management S.A. 5/23/2012
William Blair & Company, L.L.C. 5/24/2012
Investec Asset Management Limited 5/28/2012
ING Investment Management Aisa Pacific (Hong Kong) Limited 6/4/2012
Mitsubishi UFJ Asset Management Co., Ltd 6/4/2012
BOC Group Life Assurance Company Limited 7/12/2012
Hall Capital Partners LLC 8/6/2012
Board of Regents of The University of Texas System 8/6/2012
Nan Shan Life Insurance Company, Ltd. 8/6/2012
Suva 8/13/2012
British Columbia Investment Management Corporation 8/17/2012
Value Partners Hong Kong Limited 8/21/2012
Ontario Pension Board 8/29/2012
The Church Pension Fund 8/31/2012
Macquarie Bank Limited 9/4/2012
Andra AP-fonden 9/20/2012
Hai Tong Asset Management (HK) Limited 9/20/2012
IDG CAPITAL MANAGEMENT (HK) LIMITED 9/20/2012
Duke University 9/24/2012
Qatar Holding LLC 9/25/2012
EFG Bank AG 9/26/2012
Cutwater Investor Services Corporation 10/26/2012
OrbiMed Advisors LLC 10/26/2012
New Silk Road Investment Pte. Ltd. 10/26/2012
BlackRock Asset Management North Asia Limited 10/26/2012
JPMorgan Asset Management Taiwan 11/5/2012
AEGON USA Investment Management, LLC 11/5/2012
CDH Investment Advisory Private Limited 11/7/2012
Skandinaviska Enskilda Banken AB(publ) 11/12/2012
Harvest Global Investments Limited 11/12/2012
Greystone Managed Investments Inc. 11/21/2012
Uni-President Assets Management Corporation 11/21/2012
Daiwa SB Investments Ltd. 11/19/2012
APS Asset Management Pte Ltd 11/27/2012
CITIC Securities International Investment Management (HK) Limited 12/11/2012
Pacific Alliance Investment Management (HK) Limited 12/11/2012
E Fund Management (Hongkong) Co.,Limited 12/11/2012
Hillhouse Capital Management Pte. Ltd. 12/11/2012
Reference: www.csrc.gov.cn/;www.china-xbr.com/

See also

References

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