Mainland authorities have effectively lifted the US$1 billion ceiling for qualified foreign institutional investors (QFII), but further reform to the system would take time, the State Administration of Foreign Exchange (SAFE) said on Thursday. Meanwhile, the mainland saw net capital inflows in the first two months of this year, reversing an outflow trend seen from August to December last year, Wang Yungui, head of SAFE’s policy and rules department, told a briefing in Beijing. Cross-border capital net inflows totaled US$55.1 billion in the January-February period, up 38 per cent from a year earlier, Wang said. He also said private foreign exchange savings had been on the rise, with fewer trade firms selling their forex revenues into the yuan. The easing of limits for foreign institutional investors to buy securities listed on the mainland is part of the plan by Beijing to further liberalise its capital account as it pushes for the yuan to become a major global reserve currency as soon as this year. However, Guo Song, director of SAFE’s capital account management department, told the briefing it would take a long time for the mainland China to reform the QFII mechanism even though SAFE had made efforts to streamline various administrative approvals. “There’s no answer yet as to whether an approval system [on QFII] would be replaced by a system that only requires registration” at the regulator without need to go through a review procedure, Guo said, in response to a media report this week that such a change might take place as early as May. People’s Bank of China governor Zhou Xiaochuan said on Sunday that the current QFII scheme was “not convenient and flexible enough” and pledging that new policy would be launched this year.
