China has decided to scrap quota restrictions on two major inbound investment schemes in a bid to facilitate foreign institutional investors’ participation in the country’s financial market.
China will remove quotas on the US dollar-denominated qualified foreign institutional investor (QFII) scheme and its yuan-denominated sibling, RQFII, according to the provisions issued by the People’s Bank of China (PBoC) and the State Administration of Foreign Exchanges, which will take effect on June 6.
QFII will be allowed to freely choose which currency and when they remit money to the country.
China will also simplify outward remittance procedures for QFII’s securities investment gains and lift other restrictions.
The removal of investment caps, as well as a simplified process, will help guide more foreign investment into China’s stock market, which already saw inflows of overseas funds last month, said Yang Delong, chief economist of First Seafront Fund.
International investors have already shown an interest in China’s capital market since the inclusion of Chinese stocks and bonds in many major global indices, noted Wen Bin, chief analyst at China Minsheng Bank, adding that the new rule would further facilitate such investments.
Over the past two decades, China has been trying to gradually open up its financial sector to attract more foreign capital. A set of regulations, namely the Temporary Regulation on Domestic Securities Investment by QFII, was first launched by China in 2002 as a way of opening up the country’s investment markets to the world.
The temporary regulations were then replaced by long-term ones in 2006. Each QFII was assigned a quota to invest in China’s stock and bond markets.
Since the Shanghai-Hong Kong Stock Connect was launched in 2014, the QFII scheme has become less important for China to attract foreign capital. The launch of the Shenzhen-Hong Kong Stock Connect in 2016 and the Bond Connect in 2017 also further reduced the importance of the QFII scheme.
New infrastructure in Shanghai
Shanghai will invest a total of 270 billion yuan (US$38.1 billion) in its first batch of 48 new infrastructure projects in the next three years.
The metropolis plans to set up 34,000 new 5G base stations and 100,000 smart-charging piles for electric vehicles in the next three years. More than 100 unmanned factories, unmanned production lines and unmanned workshops will be built in Shanghai, bringing 150,000 enterprises to the cloud platform.
The city will also accelerate the construction of photonic scientific facilities, according to the city’s three-year development plan.
The Shanghai government will invest 60 billion yuan in these projects and try to mobilize another 210 billion yuan of private funds from society, said Ma Chunlei, head of the Shanghai Municipal Development and Reform Commission.
Shanghai’s four key areas of “new infrastructure” projects will focus on the construction of the new generation network, innovative infrastructure, artificial intelligence platforms and intelligent terminals.
Foreign trade
China’s foreign trade of goods dropped 0.7% year on year in April to 2.5 trillion yuan (about $352.6 billion), narrowing from a decline of 6.4% in the first quarter. Exports rose 8.2% in April from the same period last year.
China’s foreign trade is still under considerable downward pressure despite improvement in April trade data, said Gao Feng, the spokesperson for the Ministry of Commerce.
Trade companies are facing many difficulties, including order cancellations or delays, the difficulty of signing new orders and poor logistics, said Gao, citing surveys into domestic chambers of commerce and enterprises.
The ministry will work to help trade companies get through the hard times with more targeted measures, for instance supporting exporters to sell their goods on the domestic market and keeping the global logistics chain stable and smooth, he said.
Company news
HiSilicon, the semiconductor arm of Huawei Technologies, became the first Chinese mainland company to enter the top 10 global chip rankings by taking 10th position among global firms during the first quarter of this year.
HiSilicon moved up by five places to 10th position in only one year, market research company IC Insights said in its latest report.
Between January and March this year, HiSilicon notched up sales of $2.67 billion, up by 54% on a yearly basis, despite the US government restrictions and the Covid-19 pandemic, the report said.
The strong results came after HiSilicon surpassing US chip giant Qualcomm Inc in smartphone processor shipments on the Chinese mainland for the first time amid coronavirus-linked disruptions that have harmed most of the major players, according to Chinese research firm CINNO.
The story was written by Xu Jiangshan and first published at ATimesCN.com. It was translated into English by Nadeem Xu.