China said on Friday it was loosening the rules of its scheme permitting overseas institutions to put money into the country's capital markets, a move welcomed by foreign investors.
More than 40 banks and asset managers have won permission so far to invest over $7 billion under the Qualified Foreign Institutional Investor (QFII) scheme, giving them access to China's A-share and bond markets.
The China Securities Regulatory Commission said it was lowering to $5 billion from $10 billion the threshold of assets that fund management companies, insurers and pension and trust funds must have under management to qualify for the scheme.
The requirement for securities firms and commercial banks would remain at $10 billion, the agency said on its Web site (www.csrc.gov.cn).
"Any loosening of the rules has to be a positive for the market," said one executive from an overseas securities firm. "But given that there is more demand than QFII available, the impact could be limited," he said.
China raised the overall QFII quota last year to $10 billion from $4 billion. Applications have already been submitted for the remaining quota, the executive said.
The regulator did not address the issue of repatriation of funds, which it said was a matter for the foreign exchange regulator. Under the current rules in place since late 2002, insurers, charity and pension funds are allowed to repatriate all their money three months after they make QFII investments, while the lock-up period for other types of institutions is one year.
Foreign investors said they would welcome any shortening of the lock-up period because it would boost liquidity and open more channels for retail investors.
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