China’s securities regulator said the world’s second-biggest economy, where the benchmark stock index has fallen 5.9 percent this year, is ready to give foreign investors more access to its financial markets.
China will “definitely” expand the quota provided to foreign investors under its Qualified Foreign Institutional Investor (QFII) program once the US$80 billion current allotments are filled, chairman of the China Securities Regulatory Commission (CSRC), Guo Shuqing (郭樹清), said at a briefing in Beijing yesterday.
China’s central bank and foreign exchange regulator have no issues with expanding the quota, he said.
“We are ready to implement many more measures to help resolve the issue of inconvenience,” Guo said at the briefing, held as part of the Chinese Communist Party’s 18th Party Congress.
Those measures include tax incentives and rebates for foreign investors, on which there has been “solid progress,” and support from other government departments, he said, without giving details.
Since becoming CSRC chairman a year ago, Guo has cut trading fees, pushed companies to increase dividends and let trust companies buy equities to bolster a stock market that is set for a third straight year of declines. Goldman Sachs Asset Management chairman Jim O’Neill in September called Chinese stocks the most attractive among the BRIC (Brazil, Russia, India, China) nations.
China raised QFII quotas to US$80 billion from US$30 billion in April. The securities regulator is studying the possibility of raising the US$1 billion ceiling on individual funds in the program, Guo said.
The CSRC, the People’s Bank of China and the State Administration of Foreign Exchange have also agreed in principle to raise the quota for the Renminbi Qualified Foreign Institutional Investor program by 200 billion yuan (US$32 billion), Guo said.
The program allows investors to raise yuan overseas and use the money to buy stocks and bonds on domestic Chinese markets.
Measures for expanding the quota, requested by Hong Kong officials, are being prepared and should be implemented soon, Guo said.
The securities regulator is also studying rule changes that would lower the threshold for Chinese companies to sell shares in Hong Kong, Guo said. Any changes would need the approval of Hong Kong authorities, with no formal agreement reached yet, according to Guo.
Regulators are studying ways to improve the management of foreign exchange flows, according to Guo. The securities regulator is considering rules allowing large institutional investors, to move money out of China in stages, either within a few years or in a single year, he said.
“In the past, we encouraged inflows and restricted outflows of funds,” Guo said.
China should move to “more balanced” and “more neutral” measures, he said. “That doesn’t mean that there will be no control at all.
“There will certainly have to be some control so that market movements will not be too volatile,” Guo said.