Qualified Foreign Institutional Investor

The Qualified Foreign Institutional Investor program, one of the first efforts to internationalize the RMB, represents China’s effort to allow, on a selective basis, global institutional investors to invest in its RMB denominated capital market.^[1] Once licensed, foreign investors are permitted to buy RMB-denominated “A shares" in China's mainland Shanghai and Shenzen stock exchanges.^[2] Thus foreign investors benefit from an opportunity to invest onshore, which is otherwise often insulated from the rest of the world, and subject to capital controls governing the movement of assets in-and-out of the country.^[3]

Development

The program has been in operation for over a decade, and quotas allocating RMB under licenses have expanded steadily. By the end of April 2011, 103 licensed QFII investors had been granted a combined quota of $20.7 billion to invest in China's capital markets under the QFII program, UBS AG currently holds the greatest single share of quota. Foreign access to China's yuan-denominated "A" stocks are still limited, with quotas placed under the QFII program amounting to US$30 billion.^[4]

In April, 2012, the Qualified Foreign investment quota was increased from US$30 billion to US$80 billion. Before the increase, the overall value of approved QFII and RQFII (offshore Renminbi QFII^[5]) funds was only 0.8% of total market capitalization and only US$25 billion of the US$30 billion quota was used. While aspects of the increased quota seem likely to take business from Hong Kong, a pilot program in Wenzhou for domestic investors to invest abroad was considered a possible offset for the financial center.^[6] The QFII expansion was also followed quickly by the "approval of new ETF products that will be denominated in offshore yuan (CNH) but will trade on the Hong Kong Stock Exchange".^[7]

China granted $910 million worth of investment quotas to 11 foreign institutional investors in March 2013 The quotas, under the Qualified Foreign Institutional Investor (QFII) scheme, were awarded to overseas institutions including Generali Fund Management S.A, IDG Capital Management (HK) Ltd and Cutwater Investor Services Corp. By the end of March 2013, China had awarded a combined $41.745 billion of QFII quotas to 197 foreign institutions.^[8]

By the end of February 2014, the total quotas issued under the QFII programme to $52.3 billion as of Feb. 28 from $51.4 billion at the end of December, and to 180.4 billion yuan ($29.44 billion) from 167.8 billion yuan under the RQFII programme, according to data by the Chinese agency, SAFE^[9]

Background

Regulations of the QFII program were based on "Temporary Regulation on Domestic Securities Investment by Qualified Foreign Institutional Investor" (合格境外机构投资者境内证券投资管理暂行办法), which was publicized on 5th Nov 2002 and ceased to be in effect on 1st Sep 2006, and "Regulation on Domestic Securities Investment by Qualified Foreign Institutional Investor"(合格境外机构投资者境内证券投资管理办法), which is publicized on 24th Aug 2006, and came into effect on 1st Sep 2006.^[10]

Pursuant to "Regulation on Domestic Securities Investment by Qualified Foreign Institutional Investor"，to qualify as a QFII, the candidate must:

have stable finance, good credibility, meet the minimum asset scale set by China Securities Regulatory Commission (CSRC);
the number of staffs meet the requirement set by the authority in its own country or area;
has healthy governing structure and complete internal control system, received no significant punishment in the last 3 years;
candidate's home country has complete legal and supervision system, and its home country or home area has signed Memorandum of Understanding(MOU) with CSRC, and maintains effective supervision cooperation;
other requirements set by CSRC based on prudence.

Custody banks

QFII Qualification Statistics

No.	Name of QFII	Qualification approved date
1	UBS AG	May 23, 2003
2	Nomura Securities Co., Ltd.	May 23, 2003
3	Morgan Stanley & Co. International Limited	June 5, 2003
4	Citigroup Global Markets Limited	June 5, 2003
5	Goldman, Sachs & Co.	July 4, 2003
6	Deutsche Bank AG or Deutsche Bank Aktiengesellschaft	July 30, 2003
7	The Hongkong and Shanghai Banking Corporation Limited	August 4, 2003
8	ING Bank N.V.	September 10, 2003
9	JPMorgan Chase Bank	September 30, 2003
10	Credit Suisse (HongKong) Limited	October 24, 2003
11	Standard Chartered Bank (HongKong) Limited	December 11, 2003
12	Nikko Asset Management Co., Ltd.	December 11, 2003
13	Merrill Lynch International	April 30, 2004
14	Hang Seng Bank	May 10, 2004
15	Daiwa Securities SMBC Co., Ltd.	May 10, 2004
16	Lehman Brothers International (Europe)	July 6, 2004
17	Bill & Melinda Gates Foundation	July 19, 2004
18	INVESCO Asset Management Limited	August 4, 2004
19	ABN AMRO Bank N.V.	September 2, 2004
20	Société Générale	September 2, 2004
21	Templeton Asset Management Ltd.	September 14, 2004
22	Barclays Bank PLC	September 15, 2004
23	Dresdner Bank Aktiengesellschaft	September 27, 2004
24	Fortis Bank SA/NV	September 29, 2004
25	BNP Paribas	September 29, 2004
26	Power Corporation of Canada	October 15, 2004
27	Calyon S.A.	October 15, 2004
28	Goldman Sachs Asset Management International	May 9, 2005
29	Martin Currie Investment Management Ltd.	October 25, 2005
30	Government of Singapore Investment Corporation Pte. Ltd.	October 25, 2005
31	AIG Global Investment Corp.	November 14, 2005
32	Temasek Fullerton Alpha Investments Pte. Ltd.	November 15, 2005
33	JF Asset Management Limited	December 28, 2005
34	The Dai-ichi Mutual Life Insurance Company	December 28, 2005
35	DBS Bank Ltd.	February 13, 2006
36	AMP Capital Investors Ltd.	April 10, 2006
37	Scotiabank or The Bank of Nova Scotia	April 10, 2006
38	KBC Financial Products UK Limited	April 10, 2006
39	La Compagnie Financière Edmond de Rothschild Banque	April 10, 2006
40	Yale University	April 14, 2006
41	Morgan Stanley Investment Management Inc.	July 7, 2006
42	Prudential Asset Management (Hongkong) Limited	July 7, 2006
43	Stanford University	August 5, 2006
44	GE Asset Management Incorporated	August 5, 2006
45	United Overseas Bank Limited	August 5, 2006
46	Schroder Investment Management Limited	August 29, 2006
47	HSBC Investments (Hongkong) Limited	September 5, 2006
48	Shinko Securities Co., Ltd.	September 5, 2006
49	UBS Global Asset Management (Singapore) Ltd.	September 25, 2006
50	Sumitomo Mitsui Asset Management Company, Limited	September 25, 2006
51	Norges Bank	October 24, 2006
52	Pictet Asset Management Limited	October 25, 2006
53	The Trustees of Columbia University in the City of New York	March 12, 2008
54	Prudential Asset Management Co., Ltd.	April 7, 2008
55	Robeco Institutional Asset Management B.V.	May 5, 2008
56	State Street Global Advisors Asia Limited	May 16, 2008
57	Platinum Investment Company Limited	June 2, 2008
58	KBC Asset Management N.V.	June 2, 2008
59	Mirae Asset Investment Management Co., Ltd.	July 25, 2008
60	ACE INA International Holdings, Ltd.	2008.8.5
61	Caisse de dépôt et placement du Québec	2008.8.22
62	President and Fellows of Harvard College	2008.8.22
63	Samsung Investment Trust Management Co., Ltd.	2008.8.25
64	AllianceBernstein Limited	2008.8.28
65	Oversea Chinese Banking Corporation Limited	2008.8.28
66	First State Investment Management (UK) Limited	2008.9.11
67	DAIWA Asset Management Co.	2008.9.11
68	Shell Asset Management Company B.V.	2008.9.12
69	T. Rowe Price International, Inc.	2008.9.12
70	EARNEST Partners, LLC	12/13/2011
71	Korea Investment Corporation	12/28/2011
72	Russell Investments Ireland Limited	12/28/2011
73	Metzler Asset Management GmbH	12/31/2011
74	HI Asset Management Co., Linmited.	12/31/2011
75	Shinhan BNP Paribas Asset Management Co., Ltd.	1/5/2012
	Stichting Pensioenfonds voor Huisartsen	1/5/2012
	National Pension Service	1/5/2012
	Mercuries Life Insurance Co,Ltd	1/30/2012
	Prudential Financial Securities Investment Trust Enterprise	1/31/2012
	Principal Global Investors LLC	1/31/2012
	Hospital Authority Provident Fund Scheme	1/31/2012
	TransGlobe Life Insurance Inc.	2/3/2012
	Public Mutual Berhad	2/3/2012
	Meiji Yasuda Asset Management Company Ltd.	2/27/2012
	Cathay Life Insurance Co., LTD.	2/28/2012
	Sumitomo Mitsui Banking Corporation	2/28/2012
	Fubon Life Insurance Co. Ltd	3/1/2012
	American International Assurance Company,Limited	3/5/2012
	Neuberger Berman Europe Limited	3/5/2012
	KHAZANAH NASIONAL BERHAD	3/7/2012
	Capital Research and Management Company	3/9/2012
	Tokio Marine Asset Management Co.,Ltd	3/14/2012
	Hana Daetoo Securities Co,Ltd	3/29/2012
	Genesis Asset Managers,LLP	3/30/2012
	City of London Investment Managementi Company Limited	3/30/2012
	JPMorgan Asset Management (UK) Limited	3/30/2012
	Okasan Asset Management Co.,Ltd	3/30/2012
	Prescient Investment Management PTY LTD	4/18/2012
	Dongbu Asset Management Co.,Ltd.	4/20/2012
	Janus Capital Managemente LLC	4/20/2012
	Mizuho Asset Management Co., Ltd.	4/26/2012
	Henderson Global Investors Limited	4/28/2012
	Eurizon Capital S.A.	5/2/2012
	BOCI-Prudential Asset Management Limited	5/3/2012
	Fullerton Fund Management Company Ltd	5/4/2012
	Lion Global Investors Limited	5/7/2012
	GENERAIL Fund Management S.A.	5/23/2012
	William Blair & Company,L.L.C.	5/24/2012
	Investec Asset Management Limited	5/28/2012
	ING Investment Management Aisa Pacific (Hong Kong) Limited	6/4/2012
	Mitsubishi UFJ Asset Management Co.,Ltd	6/4/2012
	BOC Group Life Assurance Company Limited	7/12/2012
	Hall Capital Partners LLC	8/6/2012
	Board of Regents of The University of Texas System	8/6/2012
	Nan Shan Life Insurance Company,Ltd.	8/6/2012
	Suva	8/13/2012
	British Columbia Investment Management Corporation	8/17/2012
	Value Partners Hong Kong Limited	8/21/2012
	Ontario Pension Board	8/29/2012
	The Church Pension Fund	8/31/2012
	Macquarie Bank Limited	9/4/2012
	Andra AP-fonden	9/20/2012
	Hai Tong Asset Management (HK) Limited	9/20/2012
	IDG CAPITAL MANAGEMENT (HK) LIMITED	9/20/2012
	Duke University	9/24/2012
	Qatar Holding LLC	9/25/2012
	EFG Bank AG	9/26/2012
	Cutwater Investor Services Corporation	10/26/2012
	OrbiMed Advisors LLC	10/26/2012
	New Silk Road Investment Pte. Ltd.	10/26/2012
	BlackRock Asset Management North Asia Limited	10/26/2012
	JPMorgan Asset Management Taiwan	11/5/2012
	AEGON USA Investment Management, LLC	11/5/2012
	CDH Investment Advisory Private Limited	11/7/2012
	Skandinaviska Enskilda Banken AB(publ)	11/12/2012
	Harvest Global Investments Limited	11/12/2012
	Greystone Managed Investments Inc.	11/21/2012
	Uni-President Assets Management Corporation	11/21/2012
	Daiwa SB Investments Ltd.	11/19/2012
	APS Asset Management Pte Ltd	11/27/2012
	CITIC Securities International Investment Management (HK) Limited	12/11/2012
	Pacific Alliance Investment Management (HK) Limited	12/11/2012
	E Fund Management (Hongkong) Co.,Limited	12/11/2012
	Hillhouse Capital Management Pte. Ltd.	12/11/2012
Reference: www.csrc.gov.cn/;www.china-xbr.com/

References

↑ Zhao, Samuel. "A Guide to the Qualified Foreign Institutional Investors Scheme for Navigating Investment into China". https://www.bbh.com/wps/wcm/connect/0545b8804ea33036983edb2be2b7957f/ISM_QFII_GlobalView_Reprint_Single+Page.pdf?MOD=AJPERES&CACHEID=0545b8804ea33036983edb2be2b7957f. External link in |website= (help); Missing or empty |url= (help)
↑ Zhao, Samuel. "A Guide to the Qualified Foreign Institutional Investors Scheme for Navigating Investment into China". https://www.bbh.com/wps/wcm/connect/0545b8804ea33036983edb2be2b7957f/ISM_QFII_GlobalView_Reprint_Single+Page.pdf?MOD=AJPERES&CACHEID=0545b8804ea33036983edb2be2b7957f. External link in |website= (help); Missing or empty |url= (help)
↑ China further loosens its capital controls - International Herald Tribune (August 20, 2007). Retrieved on January 21, 2009.
↑ Legg Mason Seeks China License to Trade Yuan-Denominated Stocks - Bloomberg (March 10, 2009). Retrieved on March 10, 2009.
↑ Chiu, Jeckle, et al. "New RQFII Rules Announced: New Ways to Use Offshore RMB - Part II", Mayer Brown (law firm) web post, 4 January 2012. Retrieved 2012-04-10.
↑ Stephen, Craig, "China’s welcome mat for foreign investors", MarketWatch, April 8, 2012. Retrieved 2012-04-10.
↑ Sweeney, Pete, "China approves new yuan ETFs in Hong Kong", Reuters, April 19, 2012. Retrieved 2012-04-19.
↑ http://www.reuters.com/article/2013/04/09/china-investment-qfii-idUSL3N0CI10A20130409
↑ "UPDATE 1-China raises foreign institutional investor quota by $3 bln in Feb". http://www.reuters.com/article/2014/02/28/china-investment-qfii-idUSL3N0LX35X20140228. External link in |website= (help); Missing or empty |url= (help)
↑ 合格境外机构投资者境内证券投资管理办法, xinhuanet.com, 2006年08月26日.

External links

China Securities Regulatory Commission (中国证券监督管理委员会) website (Chinese)
Complete list of QFII license holders (English)

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