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CSRC Solicits Public Comments on the Measures for the Administration of Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors (Consultation Paper) and the Supporting Rules
31-01-2019

  The China Securities Regulatory Commission (CSRC) is soliciting public comments on revising and consolidating the Measures for the Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors, the Measures for the Administration of Domestic Securities Investment by RMB Qualified Foreign Institutional Investors, and their supporting rules.

  The QFII scheme and the RQFII scheme were respectively launched in 2002 and 2011. As of the year end of 2018, total QFII quota has reached USD 150 billion (currently USD 300 billion), and the aggregated quota of USD 101.1 billion has been granted to 309 QFIIs. The RQFII scheme has expanded from Hong Kong to 19 countries and regions. Total RQFII quota has reached RMB 1.94 trillion, and the aggregated quota of RMB 646.7 billion has been granted to 233 RQFIIs. The two schemes have been operating in a steady manner, playing a positive role in channeling long-term foreign capital into China, optimizing investors' structure of capital markets, carrying out value investing, enhancing corporate governance of listed companies, and promoting the sound and steady development of China's capital markets.

  China's economy has entered a new stage of high-quality development in recent years, and the two-way opening-up of capital markets has gradually moved ahead. The current QFII and RQFII measures and provisions are no longer suited for the new environment of capital markets in terms of qualification criteria, investment operation, and ongoing supervision. In order to channel more long-term foreign capital into China and further open up capital markets, the CSRC has drafted the Measures for the Administration of Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors (Consultation Paper) (the Measures) and the Provisions on Issues Concerning the Implementation of the Measures for the Administration of Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors (Consultation Paper) (the Provisions) by revising and consolidating the current Measures for the Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors, the Measures for the Pilot Program of Domestic Securities Investment by RMB Qualified Foreign Institutional Investors, and their supporting rules. Major revisions are as follows:

  First, consolidating separate QFII and RQFII measures and provisions. The current separate QFII and RQFII measures and provisions are integrated into one set of measures and provisions. In accordance with the new Measures and Provisions, foreign institutions shall make a one-time application for the qualification status. Meanwhile, institutions from countries and regions without RQFII quota can only make investments with funds raised in foreign currencies.

  Second, relaxing qualification requirements. The quantitative criteria are removed, whereas the compliance requirements and the requirements on the types of institutions are maintained. Meanwhile, application documents are simplified, and the review process is streamlined.

  Third, expanding scope of investment. In addition to the products within the current investment scope of QFII and RQFII, the new Measures and Provisions expand the investment scope to include more products such as: (1) stocks quoted on the National Equities Exchange and Quotations (NEEQ, or the New Third Board) market, (2) bond repurchases, (3) private investment funds, (4) financial futures, (5) commodity futures, (6) options, etc. Qualified investors are also allowed to participate in margin trading and securities lending in stock exchanges. Furthermore, it is clarified that relevant trading venues shall propose the inclusion of specific products of bond repurchases, financial futures, commodity futures, and options into the investment scope to the regulatory authority for approval.

  Fourth, optimizing management of custodians. The Measures and the Provisions update relevant articles on the management of QFII custodian qualification, which has already been shifted from an approval-based item to a registration-based item, and remove the restriction on the number of custodians appointed by a QFII.

  Fifth, enhancing ongoing supervision. The Measures and the Provisions improve QFII account management, monitoring and oversight mechanisms, require additional disclosure of information on offshore hedging positions related to onshore transactions, and specify penalties against violations of laws and regulations.

  The Measures and the Provisions are released for public comments. The CSRC will review the comments from the public, make further revisions, as appropriate, and  finally issue the Measures and the Provisions.



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