The world’s second largest economy has been gauging interest from investment managers across the globe as China maintains strong economic growth in the midst of the financial crisis. Chinese restricted economic processes mean its currency ad financial markets are restricted to foreigners. New measures from regulators look set to open up the markets for foreign investors in enquiries and the Yuan.
Last month was a significant opening for China’s financial markets as the China Securities Regulatory Commission (CSRC), the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) together issued the rules for the RQFII (RMB Qualified Foreign Institutional Investor) program and officially launched the RQFII programs in Hong Kong to enable qualified Hong Kong subsidiaries of fund management companies and securities firms to use their RMB funds raised in Hong Kong to invest in mainland securities.
Although the new quotas are positive for investors there are certain restrictions, the maximum investment quota of RQFII programs is set at about 20 billion RMB, and at least 80 percent of RMB must be invest in fixed-income securities, while no more than 20 percent can be used for investment in stocks and equity funds. These restrictions on investment quota and portfolio reflect regulators’ concern with the adverse effect caused by excessive investment and their priority to keep the mainland financial market stable and to control risk.
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Chinas equities markets are heavily dominated by retail investors, these new measures will open the market to more foreign institutional investors.
The Chinese regulators have been working hard to open up the non convertible currency, last year the regulators allowed Yuan Options as well as futures contracts on the CME. China has a thriving retail FX market with leading brokers including Gain Capital, Alpari UK, FXDD, IKON FX and CMC Markets having a physical presence.
Forexmagnates team have complied a detailed report on the past, present and future opportunities China holds for margin FX and CFD brokers, available in the next quarterly report.