The State Administration of Foreign Exchange ("SAFE") has recently issued the Provisions on the Foreign Exchange Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors (the "Provisions"), and meanwhile, the People's Bank of China ("PBC") has issued the Circular on Issues Concerning the Administration of Domestic Securities Investment by Renminbi Qualified Foreign Institutional Investors (the "Circular"), both of which take effect immediately from the issue date.
The Provisions and the Circular make improvements to the administration of domestic securities investment made by qualified foreign institutional investors (QFII) and Renminbi qualified foreign institutional investors (RQFII), making it more convenient for cross-border securities investment. Three major initiatives are introduced as below. First, the 20% proportion requirement of QFII capital remittance is to be cancelled, and QFII may commission custodians to handle the capital remittance. Second, the requirements for the principal lockup period for QFII and RQFII will be removed; as a result, QFII and RQFII may move funds out of the Chinese mainland, depending on their investment results. Third, QFII and RQFII will be allowed to make forex hedges on their investment in the mainland to offset risks from forex movements. Furthermore, the Provisions state that a qualified investor may handle the business of forex derivatives through a custodian or a domestic financial institution qualified for conducting the Renminbi-forex derivates business for clients.