China lowers entry barrier for foreign investors
2012-06-21 16:29:21
China plans to lower the entry barrier for foreign institutional investors looking to buy publicly traded securities in mainland exchanges, as part of reforms to add depth to the country's capital markets.
The government will cut the minimum requirement on assets under management to US$500 million (S$635 million) from US$5 billion for companies seeking a licence under the Qualified Foreign Institutional Investor (QFII) programme, the China Securities Regulatory Commission (CSRC) said in a statement on its website yesterday. The regulator also said it will allow them to invest in the country's interbank bond market.
Introducing more long-term funds from abroad will help improve market confidence, promote stable growth in China's capital markets and provide "robust" investment returns to domestic investors, the CSRC said on May 18. QFII, introduced in 2002, allows approved foreign investors to buy and sell yuan-denominated securities.
Foreign investors will be required to have at least two years of operational experience under the new rules, compared with the current minimum requirement of five years, according to yesterday's statement. Qualified investors will also be allowed to hold a combined maximum 30 per cent stake in any single yuan- denominated stock, compared with 20 per cent previously, the CSRC said.
The Shanghai Composite Index has dropped 6.8 per cent from the year's high amid concerns over the country's slowing economic growth. The gauge has erased nearly two-thirds of its value since its peak in October 2007. China's 50 million individual investors lost an average of 40,000 yuan (S$8,000) last year, according to a May 9 People's Daily report.
CSRC Chairman Guo Shuqing, who took over last year, has increased the amount of stocks foreign investors can buy in the otherwise-closed market, urged listed companies to pay more cash dividends to shareholders and made changes in how initial public offerings are priced.
The CSRC and the country's two exchanges, in Shanghai and Shenzhen, have also announced plans to cut transaction costs for stock purchases and sales, and tightened accounting scrutiny on companies that are facing delisting.