QFII curbs to ease to gradually free yuan
Print Edition
CHINA will further ease restrictions on a program allowing foreign investors in the domestic securities market as it continues to gradually free the yuan under the capital account, the foreign exchange watchdog said yesterday.
“We have been considering reforming the Qualified Foreign Institutional Investor program to ease capital flows,” Guo Song, director of the capital account management department at the State Administration of Foreign Exchange, told a press conference yesterday.
Guo said the regulator has already lifted the US$1 billion quota ceiling per institution under the QFII — the main gateway for foreign investors to access the yuan-denominated stock market.
He made the comment in response to media reports that the regulator would pick a registration system for the program. Currently, QFII investors have to get the approval of both SAFE and the China Securities Regulatory Commission.
Zhou Xiaochuan, governor of the People’s Bank of China, said during a forum on Sunday that the current QFII system was not convenient and flexible enough to facilitate foreign investment and pledged to improve the system this year.
Relaxing the QFII curbs is part of measures to press ahead with yuan convertibility under the capital account.
Wang Yungui, head of SAFE’s general affairs department, said China has “the last one kilometer” to go before realizing full yuan convertibility. Now 85 percent of items under the capital account are convertible, Wang said.
“It’s feasible for China to steadily realize capital account convertibility but controlling risk will be the top priority,” Wang said.
When asked about the yuan exchange rate formation mechanism, Wang said the central bank was withdrawing from a normal intervention on the exchange rate over the past year and the market is playing an increasingly important role.
SAFE said China’s cross-border capital net inflows rose 38 percent year on year to US$55.1 billion in the first two months of this year, reversing net outflows between August and December.
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