China eases capital rules for foreign institutional investors

China unveiled new rules on Thursday that would let foreign institutional investors buy more stocks and bonds, and make it easier for them to move money out of the country.

The new policies toward the Qualified Foreign Institutional Investor (QFII) scheme are aimed at “gradually promoting convertibility under the capital account, and expediting cross-broader investment,” the State Administration of Foreign Exchange (SAFE) said in a statement on its website.

Effective immediately, the investment limit for QFII funds would be raised, while the approval procedures are simplified, with funds no longer required to execute their investments within six months of being approved for quota.

At the same time, QFII mutual funds can have subscriptions and redemptions on a daily basis, instead of a weekly basis, increasing fund managers’ access to liquidity and addressing a major complaint.

SAFE, which previously granted individual QFIIs a certain amount of quota on a case by case basis, will now award a “base quota” of up to $5 billion to funds, based on their assets under management.

Investors still need to get approval from Chinese regulators only if their investment exceeds the base quota.

Rules restricting QFIIs from moving capital in and out of China would also be eased, according to the new rules.

The rules shortened the lock-up period on QFII redemptions to three months from 1 year.

However, the amount of money a QFII can repatriate out of China every month must not exceed 20 percent of its assets in the country, the same as in the past.

RISING OUTFLOWS

The announcement also comes at a time when foreign investors have grown increasingly concerned about Beijing’s commitment to opening its financial markets after a series of heavy-handed government interventions in the stock and currency markets.

They are also concerned that Beijing is making it easier for foreign funds to come into the country at a time when domestic companies are struggling to find capital.

The government has also taken a series of steps to make it more difficult for money to move out of the country in recent weeks as funds have evacuated from yuan-denominated assets on concerns that the currency is set to depreciate further.

Ivan Shi, head of research at fund consultancy Z-Ben Advisors, said the new rules may be an attempt to reassure foreign institutional investors.

He added it could also be part of a lobbying campaign from Beijing to get Chinese stocks included in MSCI’s benchmark indexes, which would likely channel billions of dollars into China’s struggling stock markets as funds reallocate portfolios.

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Reuters

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.