Quotas for foreign investment increase

As of July 30 this year, the State Administration of Foreign Exchange (SAFE) had granted a total investment quota of $44.95 billion to 210 institutional investors under the QFII plan, according to statistics posted on the SAFE's website Wednesday.

As for the RQFII scheme, 34 institutions held a combined quota of 121.9 billion yuan ($19.88 billion) by July 30 this year, according to the SAFE.

The growth in newly granted quotas in July was considerably greater than that seen in the previous month. The SAFE granted $1.49 billion of QFII quotas in July, compared to June's $800 million. The authority granted 17 billion yuan RQFII quotas in July, compared to 9.7 billion yuan in June.

The government expanded the QFII and RQFII quotas to inject more money into the depressed mainland equity market, Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, told the Global Times.

The increased quotas provided more channels for foreign investors to purchase mainland stocks, bonds and money market instruments, according to Zhou.

The China Securities Regulatory Commission (CSRC) announced on July 12 that it had raised the QFII investment quota to $150 billion.

The QFII scheme was launched in 2002 to allow licensed foreign investors to buy and sell A shares with capital accounts controlled in the country. The RQFII scheme was launched at the end of 2011 with an initial quota of 20 billion yuan, which has since increased to 270 billion yuan.

"The authorities have raised the investment quota, but it's still up to overseas investors as to whether they want to invest in the mainland market," Zhang Xin, an analyst from Guotai Junan Securities, told the Global Times Thursday.

According to the CSRC, the QFII and RQFII schemes account for around 1.6 percent of investment in the Chinese mainland A-share market.

"It's necessary for the authority to control the proportion of overseas investment in the mainland stock market in order to better control the risk involved," Zhang said.

If overseas investment reaches a large scale in the mainland stock market, regulators should be aware of the risk of the money flowing out of the country, Zhang said.

June this year saw a record 29 new QFII accounts opened on the mainland, according to Securities Daily Thursday. The first half of 2013 saw over 100 accounts opened, almost double the number that were opened in the whole of 2012, the report said.