Draft rules were issued Friday to increase the amount which an individual Qualified Foreign Institutional Investors (QFII) fund can invest in China's financial markets.

Under the new rules, the draft says, the upward limit of investment in the QFII program for an overseas institute will be increased to US$1 billion from the previous US$800 million, the State Administration of Foreign Exchange (SAFE) said.

The minimum quota for QFII investment is US$20 million, unchanged from previous rules.

The move would attract more overseas capital to China's financial markets and help buoy investor confidence, especially when the equities market fluctuated, said Guosen Securities analyst Yang Tao.

China's key Shanghai index plummeted 6.74 percent Monday in the largest daily drop since June last year. The plunge followed increases for four consecutive days and the index edged up 0.58 percent to end at 2,861.61 points Friday.

The QFII program was introduced in 2002 by the China Securities Regulatory Commission (CSRC) and the People's Bank of China, the central bank to provide for foreign capital access to the country's financial markets. QFII funds are allowed to invest in Chinese shares, treasuries, convertible and enterprise bonds.

According to CSRC statistics, 86 overseas investors had been granted QFII status as of Aug. 17.

SAFE is to solicit public opinion on the draft rules from Sept. 4 to 18.

(Xinhua News Agency September 4, 2009)