With a slight downturn in economic growth Chinese regulators are giving foreign institutional investors more leeway to invest in yuan denominated securities. The six Qualified Foreign Institutional Investors that are allowed to trade/ invest in Chinese yuan securities have been granted an increase in the quota from $500 million to $600 million for January 2012.
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Chinese has been restricting its financial markets to foreign investors, most trading is either done in Hong Kong or Singapore. Chinese regulators have been edging closer to liberalising the economy by allowing institutional investors to invest in Chinese stocks.
China’s equity markets has around 70% retail participation and is prone to extreme volatility as retail traders tend to follow the rumour.
The QFII regulatory framework was established in 2002 to allow foreign investors to invest directly in China’s capital markets.
China’s massive manufacturing industry has been ‘ushing’ regulators to provide better products for hedging purposes, The regulators allowed offshore use of renmbini in 2009 as a pilot study and the move triggered Hong Kong taking over 553.6 billion of Yuan deposits.
Forexmagnates Q4 report for 2011 has a detailed analysis of spot FX in China.