Detailed Regulations for QFII to be out Soon, But No Harry for QDII

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Last updated at: (Beijing Time) Monday, November 18, 2002

Detailed Regulations for QFII to be out Soon, But No Harry for QDII

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Nov.14, 2002 saw China Securities Regulatory Commission (CSRC), People's Bank of China and State Administration of Foreign Exchanges hold a demonstration in Beijing on the operating details for the Qualified Foreign Institutional Investor (QFII). And news says that the departments concerned are stepping up efforts in mapping out the detailed regulation for the operation of QFII, which is expected to be out before December 1, 2002.

Invited to attend the demonstration were Charter Bank, Hong Kong Shanghai Banking Corporation, Citibank, Deutsche Bank, SBC Warburg Bank and Nomura Securities Co. Ltd and some other securities companies domestic and foreign.

Persons concerned expressed that the study and demonstration on the QFII has been carried out for more than a year now and the detailed regulation for operation soon to be brought out would fully sort for the opinions of the marketers. And relevant regulations would be worked out under the framework of the already issued provisional regulations for the QFII on such questions as the application for the abouchement quota of foreign capital, deposit and clearing qualification, etc.

As to the schedule for bringing out the Qualified Domestic Institutional Investor (QDII), authorities say that the departments concerned are still pondering on it. Though not denying the practices of the QDII in principle it will be brought out so long as conditions are ripe. Yet it's "not to be in a hurry" in handling it.

As defined in the provisional regulations, for the QFII, they must entrust domestic securities business dealers to carry out securities transactions in China. This has given the domestic securities business-dealers chances of being entrusted to handle the transaction or brokerage. The Shenyin & Wanguo Securities Co., Ltd. has recently started its visit to QFII in Hong Kong, including banks and securities companies. As Jiang Guofang, vice president of Shenyin & Wanguo revealed the company would have a QFII promotion activity at the beginning of next month in Hong Kong.

As regulated in the provisional regulation, the business scale of the QFII running the securities assets must not be less than 10 billion US dollars, many smaller securities are warded outside the gate. For this Guo Shuqing, director of the State Administration of Foreign Exchanges said, "This has to be handled slowly and steadily, and the scale requirement for investors may be lowered later on but it's impossible now," when receiving interview with the media reporter.

As to the promoted quota for the QFII, Guo Shuqing said, there wer two principles: one being "not to be too high, nor to be too low" for investors to be accepted; another being that there wouldn't be fluctuations at the beginning. It would be decided according to the circumstances with regard to number of investors and to be considered in terms of total amount, which would be controlled within several billions of US dollars at the very beginning. For the moment, the central government hasn't laid down any definite proportion for the QFII in the securities market. However, it is hoped that the rate would be a little higher, said Guo Shuqing.

The putting into the market of the QFII would increase greatly the capital flow in the market, thus making it more difficult to lay control over the foreign exchanges, said Guo Shuqing. Nonetheless, the state is able to do it well. This didn't mean that the regulation worked out by the state would set a gag on the normal investors but for stabilizing the market, for a steady inflow and outflow of the capital. If the inflow and outflow of the capital is too concentrated, explained Guo Shuqing, the state wouldn't be able to bear it nor the market nor the individual investors and this would certainly rouse the fluctuations in the financial market. It is hoped that investors would abide by the regulation on the foreign exchange control, make autonomy investment, creating a relatively easy in-and-out flow of capital and not to be over-concentrated, thereby avoiding incurring influence on the financial market.

By People's Daily Online

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