Skip to main content

You are here

Blog Listing Page

Accessing China: New QFII rule changes and A-Share inclusion

Accessing China: New QFII rule changes and A-Share inclusion

In the first week of February 2016, China’s State Administration of Foreign Exchange (SAFE) announced some key Qualified Foreign Institutional Investor (QFII) rule changes created to ease restrictions on foreign investment in China A shares and bring the rules more in line with the RQFII scheme.  FTSE Russell has welcomed this announcement as a major step forward for market access and capital repatriation.

The table below summarizes the key QFII rule changes. They apply to foreign investors who already have QFII licenses – investors without a QFII license need to apply for one from the China Securities Regulatory Commission (CSRC). Whether the CSRC intends to improve the process/time it takes to gain a QFII license, at this stage remains unknown.

Some of the restrictions remain unchanged. For example, QFIIs cannot repatriate more than 20% of previous year end’s total assets each month. The issue of the settlement cycle of A-shares being inconsistent with prevalent international best-practice is also not addressed with these new rules. No RQFII scheme changes were mentioned in the SAFE announcement.

Source: FTSE Russell, www.safe.gov.cn


As part of the 2015 Country Classification Review, FTSE Russell stated that China A shares would remain on the FTSE Watch List for possible inclusion in Secondary Emerging, as the market did not meet the required capital mobility and settlement and clearing criteria. However, the welcome SAFE rule changes will be raised by the FTSE Country Classification Advisory Committee ahead of the formal interim update in March 2016.

While the standard FTSE global benchmarks are yet to incorporate China A shares, in 2015 FTSE Russell launched the FTSE Global China A Inclusion Index Series as a set of transitional tools providing market participants with a choice of how to include China A shares in global benchmarks. The allocation of China A shares is adjusted proportional to the changes in the approved quota and is in line with the accessibility available to international investors, or can be customized based on a market participant's specified QFII/RQFII allocation. This approach covers not only the currently available quota schemes (QFII and RQFII), but also those from any other existing and future schemes that increase market access, such as the Shanghai-Hong Kong Stock Connect program. Market participants who do not wish to have China A shares in their global benchmarks can continue to use the FTSE Global Equity Index Series, which will remain unchanged.

See the factsheet and Managing the Transition Insights Paper for more information on the FTSE Global China A Inclusion Index Series.

-----------------------

© 2016 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, “FTSE TMX”) and (4) MTSNext Limited (“MTSNext”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.

All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Russell indexes or the fitness or suitability of the indexes for any particular purpose to which they  might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this communication  should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group index data and the use of their data to create financial products require a license from FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors.

 

 

Blog Listing Page