Shanghai — China’s foreign exchange regulator said on Tuesday that it has decided to scrap quota restrictions on two major inbound investment schemes, as a weakening yuan and rising outflows prompt Beijing to seek to attract more foreign capital.
It said the move will “make it much more convenient for overseas investors to participate in China’s domestic financial markets, making China’s bond and stock markets more broadly accepted by international markets”. The removal “is a clear signal that policy makers want to encourage capital inflows”, wrote Win Thin, global head of currency strategy at Brown Brothers Harriman. “The corollary is that they are still very worried about capital outflows and so will make sure to avoid any steps that might increase them.”
China introduced the QFII scheme in 2002 and RQFII in 2011 as part of efforts to encourage foreign participation in its financial markets. But the channels have become increasingly overshadowed by the stock connect and bond connect schemes, which allow overseas investors to access China’s onshore markets with no quotas.