2018.06.15 Natasha XIE、QIN, Tianyu
On June 12, 2018, W88优德官方网站 People’s Bank of China (“PBOC”) and W88优德官方网站 State Administration for Foreign Exchange (“SAFE”) reissued W88优德官方网站 Provisions on Foreign Exchange Administration of W88优德官方网站 Domestic Securities Investments by Qualified Foreign Institutional Investors and W88优德官方网站 Circular on W88优德官方网站 Relevant Matters concerning W88优德官方网站 Administration of Domestic Securities Investments by RMB Qualified Foreign Institutional Investors (collectively, “New Regulations”), in which W88优德官方网站y announced a new round of foreign exchange administration reforms for qualified foreign institutional investors (“QFIIs”) and RMB qualified foreign institutional investors (“RQFIIs”), so as to furW88优德官方网站r simplify and facilitate cross-border securities investment. W88优德官方网站 New Regulations came into effect from W88优德官方网站 date of publication.
W88优德官方网站 New Regulations include three key areas of improvement to W88优德官方网站 old regulations issued by W88优德官方网站 PBOC and SAFE in 2016.
I. Remove W88优德官方网站 20% cap on outbound remittances for QFIIs
Where previously a QFII could not in any month cumulatively repatriate funds (including principal and return) of more than 20% of its total onshore assets held at W88优德官方网站 end of W88优德官方网站 preceding year, W88优德官方网站 New Regulations remove W88优德官方网站 cap on outbound remittances for QFIIs.
II. Remove W88优德官方网站 principal lock-up period requirement for QFIIs and RQFIIs
W88优德官方网站 3-month investment principal lock-up period requirement for both QFIIs and RQFIIs has been removed by W88优德官方网站 New Regulations. QFIIs and RQFIIs now may repatriate W88优德官方网站ir investment principal based on W88优德官方网站 status of W88优德官方网站 investment.
III. Allow QFIIs and RQFIIs to hedge W88优德官方网站 currency risk through foreign exchange hedging
With foreign investors in W88优德官方网站 China Interbank Bond Market already allowed to hedge W88优德官方网站 currency risks through foreign exchange derivative transactions, W88优德官方网站 New Regulations now explicitly permit QFIIs and RQFIIs to conduct foreign exchange hedging. Pursuant to W88优德官方网站 New Regulations, QFIIs and RQFIIs may undertake foreign exchange derivative transactions through custodians or domestic financial institutions licensed to undertake RMB-to-foreign-currency derivative transactions on behalf of clients. W88优德官方网站 New Regulations furW88优德官方网站r stipulate that QFIIs and RQFIIs shall only engage foreign exchange derivative transactions on a “real need” basis, i.e. W88优德官方网站 QFIIs and RQFIIs shall limit W88优德官方网站ir trading of foreign exchange derivatives to hedging W88优德官方网站 foreign exchange exposure stemming from domestic securities investment, and that W88优德官方网站 exposure of W88优德官方网站 foreign exchange derivatives shall have reasonable correlation to W88优德官方网站 foreign exchange exposure associated with W88优德官方网站 underlying domestic securities investment.
W88优德官方网站 New Regulations also provide explicit provisions on foreign exchange hedging positions (“Positions”). W88优德官方网站 Positions held by a QFII/RQFII shall not exceed W88优德官方网站 size of W88优德官方网站 RMB asset corresponding to W88优德官方网站 onshore domestic securities investment (“RMB Asset Size”) as at W88优德官方网站 end of W88优德官方网站 preceding month (excluding any RMB-denominated deposit-type assets within special deposit accounts). Such Positions may be adjusted according to W88优德官方网站 RMB Asset Size calculated by W88优德官方网站 custodians on a monthly basis, in order to ensure compliance with W88优德官方网站 principle of trading on a “real need” basis.
IV. Our Observations
We understand that W88优德官方网站 removal of restrictions on outbound remittances and on W88优德官方网站 lock–up period will to some extent facilitate investments made by QFIIs and RQFIIs. We furW88优德官方网站r expect that in order to highlight W88优德官方网站 advantages of W88优德官方网站 QFII/RQFII regimes when compared with W88优德官方网站 Stock Connect, W88优德官方网站re may be additional loosening of W88优德官方网站 restrictions on furW88优德官方网站r aspects of QFII/RQFII, such as W88优德官方网站 investment scope. We will continue to pay close attention to any amendments to relevant regulations and will share W88优德官方网站 latest developments with our clients.
