By Bloomberg News – Nov 12, 2012 12:01 AM GMT+0800
China will increase the quota for a program that allows investors to raise yuan overseas and use the money to buy stocks and bonds on domestic Chinese markets, according to the nation’s securities regulator.
The China Securities Regulatory Commission, the People’s Bank of China and the State Administration of Foreign Exchange have agreed in principle to raise the quota for the RenminbiQualified Foreign Institutional Investor program by 200 billion yuan ($32 billion), Guo Shuqing, chairman of the securities regulator, said at a briefing in Beijing yesterday.
Since becoming CSRC chairman a year ago, Guo has cut trading fees, pushed companies to increase dividends and let trust companies buy equities to bolster a stock market that’s set for a third straight year of declines. Goldman Sachs Asset Management Chairman Jim O’Neill in September called Chinese stocks the most attractive among the BRIC nations.
“We are ready to implement many more measures to help resolve the issue of inconvenience,” Guo said at the briefing, held as part of the 18th Chinese Communist Party congress. Those measures include tax incentives and rebates for foreign investors, on which there has been “solid progress,” and support from other government departments, he said, without giving more details about the policies.
The nation will “definitely” expand the quota provided to foreign investors under China’s Qualified Foreign Institutional Investor program once the $80 billion current allotments are filled, Guo said. China’s central bank and its foreign exchange regulator have no issues with expanding the quota, he said.
China raised QFII quotas to $80 billion from $30 billion in April. The securities regulator is studying the possibility of raising the $1 billion ceiling on individual funds in the QFII program, Guo said.
Measures for expanding the RQFII quota, requested by Hong Kong officials, are being prepared and should be implemented soon, Guo said.
The securities regulator is also studying rule changes that would lower the threshold for Chinese companies to sell shares in Hong Kong, Guo said. Any changes would need the approval of Hong Kong authorities, with no formal agreement reached yet, according to Guo.
Regulators are studying ways to improve the management of foreign exchange flows, according to Guo. The securities regulator is considering rules allowing large institutional investors, to move money out of China in stages, either within a few years or in a single year, he said.
“In the past, we encouraged inflows and restricted outflows of funds,” Guo said. China should move to “more balanced” and “more neutral” measures, he said. “That doesn’t mean that there will be no control at all. There will certainly have to be some control so that market movements will not be too volatile,” Guo said.
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