SHANGHAI: China will double quota for country's foreign institutional investment programme as Beijing talks up financial reforms amid stock market weakness and slowing economic growth.The State Administration of Foreign Exchange, foreign exchange regulator, said on Monday it would increase quota for Qualified Foreign Institutional Investor (QFII) programme to $300 billion from $150 billion to meet investment demand from abroad.
The QFII programme, however, has struggled to use up even existing $150 billion quota.
In December, overseas investors received quotas - amount each investor is allowed to invest under scheme - worth $101.1 billion.Jim McCafferty, head of equity research, Asia Ex-Japan at Nomura, said QFII announcement was an "incremental" change."For some individual investors that are invested in QFII programme, it's indicative of a more relaxed and more responsive government to getting those overseas investors in," he said.In contrast, index changes taking place this year, including higher weighting of Chinese A-shares in MSCI indexes, are "very, very crucial" for boosting foreign capital flows, McCafferty added.Fang Xinghai, Vice-Chairman of China's securities regulator, said on weekend that inflows into Chinese stock market could double to 600 billion yuan ($88.8 billion) in 2019 due largely to greater inclusion of A-shares in global indexes.Inflows into China's bond market, world's third-largest, are also set to rise with phased inclusion of Chinese yuan-denominated government and policy-bank bonds in Bloomberg Barclays Global Aggregate Index starting in April.The QFII programme was first introduced in 2003 to allow foreigners to invest in China, but has since been partially superseded by Stock and Bond Connect schemes linking Hong Kong and mainland markets.
The QFII quota offers potential to invest beyond traded securities.The benchmark Shanghai Composite index fell nearly 25 percent last year, making it among world's worst-performing major equity indexes, amid signs of slowing growth and an escalating trade war with United States.