More foreign capital set to enter A-share markets
The Chinese government has entirely removed the equity investment quota limits for overseas institutional investors, as the country speeds up measures for its financial opening-up. More foreign capital will flow into China's equity market following the decision, bolstering the central government's move to stabilize foreign exchange reserves amid a prolonged trade war with the US.
China's State Administration of Foreign Exchange (SAFE) announced on September 10 that it will scrap the investment quotas under the Qualified Foreign Institutional Investor (QFII) program as well as the Renminbi Qualified Foreign Institutional Investor (RQFII) program, the two schemes through which certain overseas institutional investors are allowed to invest in mainland securities products. It also removed the pilot countries and regions limitations under the RQFII program.
The scrapping of the quotas means that international investors will be allowed unfettered access to the world's second-largest capital market. The Chinese government has gradually loosened investment quotas under the QFII and RQFII programs in recent years, as it took systematic steps to open up the financial markets.
The reform also arrived at a time when major overseas index providers including MSCI and FTSE Russell have been gradually increasing the weighting of A shares in their global indexes and as overseas capital is increasingly flowing into the mainland markets.
No risk concerns
Experts noted that the time is ripe for China to usher in overseas capital without the need to fear any blows to the mainland markets.
"The cancellation of the investment quota limits indicates that China's financial market is stable enough to guarantee the security of the market while being able to withstand the impact of a large amount of foreign capital," Xi Junyang, an economics professor at the Shanghai University of Finance and Economics, told the Global Times on September 10.
Liao Mao, a Chongqing-based securities analyst, also told the Global Times on Tuesday that Chinese regulators have been scaling up efforts to deleverage in recent years, so the introduction of more foreign institutional investors will not inflict too many financial risks.
Liu Xuezhi, an economist at Bank of Communications, told the Global Times on September 10 that China's removal of the QFII and RQFII investment quota limits showed that the country is steadily moving forward with its capital account opening-up, which is in accordance with the country's general goal to promote opening-up.
Source: en.people.cn
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