China to relax QFII rules to attract more investment

China on Wednesday pledged to make it easier for qualified foreign institutional investors (QFIIs) to invest in the country's capital market -- part of the country's efforts to free up capital flows and accelerate the opening of domestic capital markets.

The country will lower the QFII threshold, including lowering the QFII asset requirements to 500 million U.S. dollars from 5 billion U.S. dollars, according to a draft of revised rules on the QFII scheme, which was posted on the website of the China Securities Regulatory Commission (www.csrc.gov.cn) to solicit public opinion.

China will further facilitate the investment and operation of the QFII program by allowing QFIIs to invest in the interbank bond market and stock index futures, according to the draft.

Meanwhile, QFIIs will be allowed to hold up to a 30-percent stake in a listed company, up from the current 20-percent stake cap.

"The move shows the country is determined to open up its capital markets. Facilitating the investment and operation of the QFII program will attract more long-term overseas funds to the markets," an unnamed official with the CSRC said, adding that the commission welcomes public feedback on the draft.

The State Council, China's Cabinet, in April increased total QFII quotas to 80 billion U.S. dollars from 30 billion U.S. dollars. So far, the CSRC has granted QFII licenses to 172 foreign investors since the program started in 2002.

The regulator has quickened QFII approvals recently, granting 5.62 billion U.S. dollars in quotas to 51 QFIIs since December.

Foreign investment under the QFII program accounts for 1.1 percent of the total market value of domestic A-shares.