Foreign Exchange Rules Related to Qualified Foreign Institutional Investors (QFIIs) Released as Expected in China
Q: When did the authority promulgate new foreign exchange rules regarding QFIIs ?
A: The State Administration of Foreign Exchange of the PRC (“SAFE”) promulgated the revised foreign exchange rules regarding QFIIs on December 7, 2012, which took effect on the same date.
Q: What is the impact of the revised foreign exchange rules on QFIIs trading futures?
A: The revised foreign exchange rules will enable QFIIs to trade futures. In the past, a QFII is permitted to participate in the trading of stock index futures; however, they are unable to trade futures due to incapability of them opening futures margin accounts. Now, under the revised foreign exchange rules, they are allowed to open futures trading accounts, which can be used as a futures margin account and therefore pave the way for QFIIs to trade futures.
Q: What is the impact of the revised foreign exchange rules on China open-ended funds(one type of QFIIs)?
A: The revised foreign exchange rules allow the China Open-ended Funds(one type of QFIIs) to repatriate or inject QFII funds on a weekly basis, other than monthly basis, as required previously. The other types of QFIIs are also allowed to repatriate the investment principal and proceeds by installments, but the revised foreign exchange rules do not provide detailed timeline for such installments. Further, there is the cap on the amount of the monthly repatriation or injection of QFIIs, which is 20% of the total QFII assets as of the end of last year.
Q: Is there any limits on investment quota under the revised foreign exchange rules?
A: The revised foreign exchange rules has abolished the limits on investment quotas of USD 1 billion in total for the following three types of QFIIs: sovereign funds, central banks and monetary authorities. For the other types of QFIIs, the current USD 1 billion limit on the total investment quotas still applies.