The China Securities Regulatory Commission (CSRC) yesterday released a detailed explanation of its recently issued rules on qualified foreign institutional investors (QFIIs).

 

Along with the People's Bank of China and the State Administration of Foreign Exchange, the CSRC last month issued a new administrative rule on the investment of QFIIs, which was based on the revision of the 2002 version. The CSRC said that the new rule is aimed at lowering the threshold to allow more QFIIs to enter China's capital market in accordance with the country's commitment to further open its financial sector.

 

According to earlier restrictions, QFIIs investing in Chinese securities had a capital lock-up period of as long as one-year, and one QFII could only establish one securities investment account and hire one securities firm as its transaction agent.

 

With the new rule, the capital lock-up period for pension funds, insurance companies and mutual fund is cut to three months.

 

"In order to encourage long-term investment in the securities market, the rule lowered the standards for institutional investors, including fund management companies and insurance companies managing long-term fund assets," the CSRC said yesterday.

 

"The new rule will attract more fund management companies, which have a more conservative investment strategy compared to securities firms, to enter China's capital market by loosening restrictions on certain aspects," said Zuo Xiaolei, chief economist at Galaxy Securities.

 

The rule also allows QFIIs to establish an investment account by themselves if the fund they manage is for a long-term investment.

 

(China Daily September 28, 2006)