Chinese Online Class - Rules changed to woo long-term QFII funds

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BIZCHINA / Center

Rules changed to woo long-term QFII funds

By Song Hongmei (chinadaily.com.cn)
Updated: 2007-07-23 17:09

China will ease the restrictions on qualified foreign institutional
investors (QFIIs) seeking to invest in the stock market, with the aim of
attracting long-term funds, the Shenzhen-based Securities Times reported
Monday.

According to the rule change jointly made by the China Securities
Regulatory Commission, the People's Bank of China, and the State
Administration of Foreign Exchange, QDIIs may directly open stock
investment accounts.

In a major adjustment, the new rules, which come into effect on September
1, stipulate that priority of QFII licensing will be given to long-term
assets management institutions such as endowment funds, insurance funds,
mutual funds and charity funds.

The assets management institutions are required to have operated
businesses for over five years and have managing securities assets of at
least US$5 billion in the most recent accounting year.

According to the adjustment, fund managers and?insurance companies are
required to have managing securities assets of no less than US$5 billion
in the most recent accounting year, down from the previous US$10 billion.

Insurance companies that have a business history of more than five years,
instead of the previously over 30 years, are qualified to apply for QFII
status, according to the?new rules.

The new rules will also abolish the paid-in capital requirement for
insurance company applicants, which are previously required to have a
paid-in capital of no less than US$1 billion.

Measures on QFII status for banks and securities companies will remain
unchanged. Their managing assets must be no less than US$10 billion.

China will expand QFII funds gradually and bolster its support for QFIIs,
which focus on long-term investment, reported the newspaper, citing the
country's securities watchdog.

To ease pressure of capital flow, the new rules also stipulate that
China's forex watchdog can readjust the date and amount of QFIIs'
remittance and repatriation of principals according to the financial
situation and the relationship between supply and demand of the foreign
exchange market.

(For more biz stories, please visit Industry Updates)

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