Chinese regulators Tuesday announced the removal of quotas for foreign investments in mainland stocks and bonds under the qualified foreign institutional investor program launched in 2002 and the renminbi qualified foreign institutional investor program introduced in 2011.
China’s State Administration of Foreign Exchange cited the move as “another major reform measure” in line with the long-term goal of comprehensively opening up China’s financial markets, said a news release on the regulator’s website.
Portfolio managers with foreign asset management firms welcomed the latest reform, even as they noted that newer access platforms — including the Stock Connect program launched in late 2014 and the Bond Connect program introduced in mid-2017 — have become dominant channels for accessing markets for mainland stocks and bonds.
Programs such as QFII provide access to some niche bond opportunities on the mainland, but recently newer channels have offered broad access without quotas, noted Edmund Goh, a Shanghai-based investment director with Aberdeen Standard Investments, responsible for that firm's onshore China bond and currency investments.
"We do not believe this policy alone will create tremendous liquidity flow ... since (the) current QFII utilization rate is low, while Stock Connect and other mechanisms offer equally easy market access," said Jing Ning, a Hong Kong-based A-shares manager with Fidelity International.
Still, with signs of continued momentum on the reform front, money managers said QFII and RQFII could yet offer interesting opportunities for foreign investors.
By way of example, Mr. Goh cited talk in the market that regulators might consider allowing foreign investors to use the QFII program as a conduit for investing in onshore funds — a move with the potential to "change the landscape a bit," he said.
