China Alert: Financial Service Focus - Issue 5, August 2012
On 27 July 2012, a revision to the main regulation governing the QFII programme (‘New QFII regulation’), which permits foreign investment in PRC listed securities, was published by the China Securities Regulatory Commission (CSRC).
The New QFII regulation represents a step towards the relaxation of China’s strict capital controls on inbound equity portfolio investments, significantly lowering the threshold for QFII license applications and allowing smaller foreign investors, private equity funds, and other institutions to enter the market for the first time. While new QFII license applicants should be aware of several longstanding PRC tax uncertainties in the treatment of QFII arrangements, this development should enhance foreign institutional investor’s participation in making investment in PRC listed securities.