China to Facilitate Foreign Investment in Domestic Securities

China is gearing up further to facilitate foreign institutional investments in its capital markets. Zhu Hexin, deputy governor of the People’s Bank of China, announced at the Lujiazui Forum in Shanghai that new measures will be introduced to streamline and enhance foreign investment in the country’s bond and securities markets.

As of the end of May, over 1,100 overseas institutions from more than 70 countries and regions have entered China’s domestic bond market. These institutions’ bond holdings have reached 4.3 trillion yuan (approximately 592.3 billion U.S. dollars), with an average annual growth rate of nearly 20 per cent over the past five years.

Speaking at the Lujiazui Forum, Zhu highlighted China’s plans to simplify and improve fund management for the Qualified Foreign Institutional Investor (QFII) scheme and its yuan-denominated counterpart, the Renminbi Qualified Foreign Institutional Investor (RQFII) programme. These programmes enable overseas investors to deploy funds into China’s domestic capital markets.

“We are revising relevant fund management regulations to further simplify and improve the fund management of qualified foreign institutional investors, support the expansion of patient capital, and support domestic institutions in making cross-border investments,” Zhu said.

The State Administration of Foreign Exchange (SAFE) has recently granted quotas totaling 2.27 billion U.S. dollars to 53 institutions under the Qualified Domestic Institutional Investor (QDII) programme. This programme allows Chinese investors to access foreign assets.

Zhu emphasised the need to leverage Shanghai’s leading role in promoting China’s financial opening. Shanghai has become the city with the highest concentration of foreign financial institutions in China, supporting 163 multinationals in establishing fund pools in the city.

“Efforts should be made to replicate and promote Shanghai’s high-level opening-up policies to the Yangtze River Delta and even the whole country,” Zhu noted. This initiative aims to achieve greater breakthroughs in the integrated development of the Yangtze River Delta and forge new advantages for an open economy at a higher level.

Zhu also mentioned plans to research and refine the cash pooling programme, integrating domestic and foreign currency management. This programme will support multinationals in establishing global or regional fund management centres in Shanghai, further bolstering the city’s position as a premier financial hub.

In conclusion, these measures are part of China’s broader strategy to attract more foreign investment and enhance the country’s financial market integration. By simplifying regulations and leveraging Shanghai’s financial prowess, China aims to create a more welcoming environment for global investors, fostering sustained economic growth and development.