Beijing will widen access to mainland equities for pension funds from Hong Kong, Taiwan and Singapore, reflecting its determination to lure more long-term investment into its volatile stock markets.
Apart from the existing qualified foreign institutional investor (QFII) scheme - an established channel for selected overseas institutions to trade yuan-denominated A shares - the China Securities Regulatory Commission (CSRC) plans to create a new system that can help pension funds profit from the mainland's economic growth, according to the official China Securities Journal.
China last month nearly tripled the QFII quota to US$80 billion from the previous US$30 billion last month, apparently wanting to boost its flagging markets with an injection of overseas capital.
Beijing has granted an additional US$4.37 billion quota to 38 qualified foreign institutions so far this year, more than double the US$1.9 billion granted for the whole of last year.
The CSRC reportedly believes the QFII programme was insufficient to meet huge demand from foreign pension funds and considered establishing a new channel for the funds to invest in A shares, but the newspaper did not elaborate.
The newspaper reported that the regulator would give special permission to pension funds' A-share investments if 'demand is really big'.
Beijing introduced the QFII scheme in 2003, and regulators hoped at the time that foreign investors would provide a steadying influence in a market where mainland investors have tended to buy on rumour, rather than on fundamentals.