China: Proposed Amendments on QFII 

February, 2006 -

and . According to the draft regulations, certain amendments are to be implemented. Under the existing regulations, QFIIs are subject to relatively long investment lock-up periods. Under the proposed amendments, the lock-up period may be reduced from one year to three months for open-ended funds, insurance companies, pension funds, charitable funds and closed-end funds, and from three years to one year for other types of QFIIs. CSRC has also proposed to depart from the existing requirement for QFII to operate on a single account basis. Draft regulations are being introduced to allow a QFII to hold multiple sub-custody accounts and multiple securities brokerage accounts. This will allow segregation of assets between the multiple sub-custody accounts and permit a wider selection of brokers. Finally, the proposed investment quota for individual QFII which can be applied for is expected to increase from USD $800 million to USD $1 billion in RMB. The proposed amendments to the two main regulations reflect the Chinese government’s on-going commitment to attract foreign investors. The existing QFII rules and requirements are rather inappropriate for open-ended funds. However, the changes proposed under the draft regulations are expected to be more attractive for open-ended funds.



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