China’s market opens to foreigners: surrender?

UNITED STATES, WASHINGTON (OBSERVATORY) — China is making its economy and markets more open. Today it became known about the elimination of important restrictions that investors have long been waiting for.

China has removed yet another obstacle to foreign investment in its capital markets almost 20 years after it first made it available.

International funds no longer need to obtain approval to purchase quotas for the purchase of Chinese stocks and bonds, the PRC State Currency Control said in a statement.

The agency lifted restrictions on the purchase of these assets by foreign investors with a total volume of $ 300 billion, about two thirds of which remain unselected, Bloomberg writes.

This step was taken as part of efforts to increase the role of the renminbi in international transactions and attract additional foreign capital to balance payments in anticipation of the likely occurrence of a stable current account deficit in the coming years.

Recently, China has devalued the renminbi, and this could provoke an outflow of capital, so the opening of the market, which should lead to an influx of new money, will help level the potential threat.

So, international investors got unhindered access to the second capital market in the world. Certainly, this is an important step towards liberalization of the economic system.

Nevertheless, foreign investors will still need to go through the registration process.


QFII and RQFII, introduced in 2002 and 2011, respectively, were the main tool for foreign institutional investors to access Chinese stock and bond markets. According to SAFE, over 400 investors from 31 countries and regions of the world invested in the country’s financial markets through these channels.

At the end of August, foreign institutions received an investment quota of $ 111.38 billion under the QFII program and 693.3 billion yuan in accordance with RQFII according to Wind.

The RQFII program, introduced in 2011, provides investors with access to the RMB for direct investment in stocks. The abolition of the first quota 17 years after the QFII program was developed eliminates one of the main shortcomings of China’s closed financial market.

By the way, this decision can also be regarded as a step towards resolving the trade war with the United States. Americans have long and insistently demanded to remove restrictions on investment.


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