13 January, 2013

On December 14, 2012, the State Administration of Foreign Exchange (“SAFE“) issued the amendments to the Provisions on Foreign Exchange Administration Concerning Investment in Securities in China by Qualified Foreign Institutional Investors (Announcement [2012] No. 2 of SAFE) (the “Announcement“), which came into force on the same date.

For investment quotas, the Announcement permits the upper limit of the investment quota of sovereign funds, central banks or monetary authorities to be over the equivalent of USD 1 billion. For account administration, the Announcement further requires that custodians shall report to SAFE’s local counterparts at their place of domicile for record purposes within five working days after the opening of foreign exchange accounts and dedicated RMB deposit accounts of qualified foreign institutional investors (“QFIIs“) and that they shall submit the official custodianship agreement to SAFE to collect the Foreign Exchange Registration Certificates of the QFIIs.

The Announcement adds one article which provides that a QFII may, upon expiry of the lock-in period for the investment principal, remit the investment principal and the investment proceeds abroad in installments or by batches; the monthly amount of funds (including investment principal and proceeds) remitted abroad by a QFII shall not exceed 20% of its total domestic assets as at the end of the preceding year. The Announcement also amends a provision on remittance of an open-end Chinese fund and allowing the custodian bank of an open-end Chinese fund to handle relevant capital inflow or outflow formalities on a weekly basis according to the net balance for fund subscription purchase and redemption, provided that the net cumulative amount of a fund remitted abroad on a monthly basis shall not exceed 20% of the total domestic assets of the said fund as at the end of the preceding year. The Announcement further makes amendments regarding specified procedural requirements as well.

The full Chinese text of the Revised Provisions is available here.