8 September, 2012
On July 27, 2012, the China Securities Regulatory Commission ("CSRC") promulgated the Regulations on the Relevant Issues Relating to the Implementation of the Administrative Measures on Securities Investment by Qualified Foreign Institutional Investors ("QFII") within the People's Republic of China (the "New QFII Rules"), which took effect immediately and superseded the existing notice on the same subject issued by CSRC on August 24, 2006.
The New QFII Rules aim to allow more institutions to gain QFII status and to facilitate the execution of their investments. In order to do so, the following changes are made to the old QFII regime:
More Liberal Qualification Requirements
Foreign financial institutions will be subject to lower qualification requirements to obtain QFII status, as shown in the table below:
| Type of Institution |
Requirements under New
QFII Rules
|
Previous
Requirements
|
|
Asset management
institutions, insurance
companies and other
institutional investors
(such as pension
funds, charitable
funds, endowments
or sovereign funds)
|
Minimum years of operation
("MYO"): 2 years
MYO: 5 years
|
AUM: USD 5 billion |
|
Assets under management
("AUM"): USD 500 million
|
||
| Securities companies | MYO: 5 years | MYO: 30 years |
|
Net asset value:
USD 500 million
|
Paid up capital:
USD 1 billion
|
|
| AUM: USD 5 billion | AUM: USD 10 billion | |
|
Having operated banking
business for over 10 yea
|
Ranked among the top
100 commercial banks
by assets worldwide
|
|
|
Tier one capital:
USD 300 million
|
||
| AUM: USD 5 billion | AUM: USD 10 billion |
Better Operation of Accounts
QFIIs will be allowed to set up separate securities accounts for their own and each of their clients' funds, and will also be allowed to open trading accounts at multiple brokerages.
Expanded Investment Options
The New QFII Rules are part of a string of changes made to further open the domestic securities markets to qualified foreign investors. In April this year, the State Council of the PRC increased the total QFII quota from USD 30 billion to USD 80 billion. The New QFII Rules will expand market access for QFIIs by allowing them to invest through the interbank bond market, in addition to trading shares, bonds, investment certificates and stock index futures on exchanges or through investment funds. Derivative instruments (other than stock index futures) and markets other than stock exchanges and the interbank bond market remain closed to QFII.
Another major amendment in the New QFII Rules is to raise the ceiling on the combined shareholding of QFIIs in any listed company in China's A-share market from 20% of the total issued share capital to 30%, which will permit QFIIs to exercise a significant degree of control over PRC listed companies. The maximum stake any single QFII may hold remains unchanged at 10%.
For further information, please contact:
Hans-Günther Herrmann, Paul Weiss
hherrmann@paulweiss.com
Yuan Yuan Zhou, Paul Weiss
yzhou@paulweiss.com