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Mainland China Removes Quotas to Attract Foreign Institutional Investors

June 17th | 2020



On May 7, 2020, the People's Bank of China ("PBOC") and the State Administration of Foreign Exchange ("SAFE") jointly released the Regulations on Funds of Securities and Futures Investment by Foreign Institutional Investors. This formalizes last September’s decision to remove quota limits for the Qualified Foreign Institutional Investor (QFII) program and the related RMB Qualified Foreign Institutional Investor program (RQFII), which came about because more channels were made available for foreign investors to participate in China’s financial markets without quota limits.


Starting June 6, 2020, QFIIs and RQFIIs will no longer need to apply to SAFE for an investment quota. Instead, they will be required to register their foreign institutional investor status with SAFE. Once registered, a QFII or RQFII, may open domestic depositary accounts with its custodian to to accept inward remittances. If a QFII or RQFII want to repatriate investment income offshore, back to its home jurisdiction, under the new regulations the custodian can process the transaction upon receiving written instructions and a commitment letter signed by the QFII or RQFII paying the relevant taxes. Time will tell whether the new regulations have their intended effect, which was to facilitate capital inflows and further attract long-term quality investment from foreign institutional investors into Mainland China.

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