HONG KONG, Apr 11: China’s foreign exchange regulator has criticised aggressive quota applications submitted by overseas institutional investors to gain access to the country’s domestic financial market.
The country’s State Administration of Foreign Exchange (SAFE) believes some requests for quotas far exceeded the actual needs of the institutions and it doubted their ability to manage a fund worth 5-10 billion yuan, the Hong Kong Economic Journal reported on Thursday, quoting unnamed sources.
SAFE also stressed that the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme quotas should not be transferred to other parties and said it would punish those who did so, without elaborating, the report added.
Beijing introduced RQFII scheme with an initial quota of 20 billion yuan ($3.2 billion) in 2011 and expanded it to 270 billion yuan at the end of 2012 to allow more access to its market.
The products, especially those that invest in the mainland’s A-share market via exchange-traded funds (ETFs), have been well received, given China’s recovering economy and stock market, in addition to its appreciating currency.
SAFE held a meeting with RQFIIs and their custodian banks on April 9 and suggested they apply for quotas based on their needs. It also asked them to submit applications with quotas, product details and operation plans by Friday.
The regulator requested RQFIIs to apply for monthly quotas at the end of each month, instead of the current practice of seeking them after 80 percent of the quotas already granted had been used, the newspaper said.
Regulatory officials could not be reached for comments.
China loosened restrictions on participants and investment products under the RQFII scheme in March. The new rules allow Hong Kong subsidiaries of mainland commercial banks and insurance companies, as well as financial institutions primarily based in Hong Kong, to take part.
($1 = 6.1939 Chinese yuan)
(agencies)
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