RQFII quota to be raised by 200 billion yuan

China will soon more than triple the quota for the renminbi qualified foreign institutional investor scheme to accommodate rising demand from Hong Kong investors, but restrictions on capital inflows and outflows will remain.

Policymakers have "agreed in principle" to expand the quota of the RQFII programme by 200 billion yuan from the current 70 billion yuan, said Guo Shuqing, China Securities Regulatory Commission's chairman, at a press conference on the sidelines of the 18th party congress.

The pilot programme, launched last December, allows for yuan-based funds raised in Hong Kong to be invested in the mainland's stock and bond markets within a certain quota.

The increase was initiated by the Hong Kong authorities, Guo said, because the current quota did not match demand.

"Last week, before the 18th party congress started, three main Hong Kong government officials in charge of financial issues raised the issue," he said. Institutional investors were most welcome, he said, as they were more mature and had more expertise than individuals, who make up 84 per cent of the mainland's stock market participants and whose irrational transactions exacerbated price fluctuations.

"We are loosening restrictions to allow more institutions to take part in the RQFII scheme," said Guo. "But it is unrealistic to expect all restrictions to be removed."

The regulator also said the quota for the QFII scheme - the original dollar-denominated programme - could be lifted if its 80 billion yuan limit was reached.