Brokers may get QDII quotas to invest overseas
Nevin Nie in Shanghai
The mainland's securities watchdog and foreign exchange authority are studying a plan to allow domestic brokerages to invest overseas through the qualified domestic institutional investor (QDII) programme.
The move could enable local brokerages to offer more products to boost income, although QDII products have not been very popular as investors are making better profits from the surging domestic stock market and rising yuan.
'We are studying the plan to allow securities firms to conduct QDII business,' said Li Dongrong, deputy administrator at State Administration of Foreign Exchange (Safe), in a summit in Shanghai yesterday.
'The approval will be given when the time is right,' Mr Li said without giving a timetable.
QDII, launched in April last year, allows financial institutions to bypass the country's capital controls and invest their clients' funds overseas.
Twenty-one institutions, mostly commercial banks, three insurers and a mutual fund, have received quotas worth US$18 million.
Mr Li said the mainland's banking, insurance and securities regulators were working with the Safe to look into the feasibility of broadening the array of overseas financial products that banks and insurers could buy through the QDII scheme.
The regulators were also planning to increase the quotas for mutual funds, Mr Li said.
'We are still at the early stage of implementing the QDII programme, which came out at a time of yuan appreciation,' said Mr Li. 'We have also encountered other problems because QDII holders can only invest in a small range of financial products and investors lack knowledge of overseas markets.'
To invest overseas, local brokerages need the China Securities and Regulatory Commission to issue detailed rules on such areas as custodian, fund management and clearing.
They also need Safe approval as the move requires converting the yuan into foreign currencies.
Only four brokerages have Safe approval - Citic Securities, China International Capital Corp, China Merchants Securities, and Bank of China International Securities.