Lifting the equity investment quota restrictions for overseas institutional investors will promote the sound development of China's financial markets. Qualified Foreign Institutional Investors (QFII) are expected to steadily increase their holdings of Chinese assets, and the volatility risks of transnational capital flows will remain low, a Chinese official said.
"The foreign investment ratios in China's stock and bond markets are relatively low," the Xinhua News Agency reported on Monday, citing Zhang Xin, deputy administrator of the State Administration of Foreign Exchange (SAFE).
With the inclusion of A shares and yuan-denominated bonds in the global mainstream market indexes and the gradual increase of their inclusion weightings, it is expected that QFIIs will steadily increase their Chinese assets after the lifting of restrictions, Zhang said.
The SAFE announced on Tuesday that it will scrap the investment quotas under the QFII program as well as the Renminbi Qualified Foreign Institutional Investor (RQFII) program. These are two programs through which certain overseas institutional investors are allowed to invest in securities products in the Chinese mainland. It also removed the pilot countries and regions limits under the RQFII program.
The removal of investment quota restrictions again demonstrates China's firm determination to promote opening-up, which is conducive to attracting more long-term capital, promoting the stability of the yuan and maintaining the balance of international payments, Zhang said.
Zhang noted that the investment style of QFII participants is more steady and they don't engage in frequent trading. Scrapping their restrictions could help improve the structure and trading styles of domestic investors.
