China: China QDII Policies Announced
The People's Bank of China, the Chinese central bank, recently announced principle policies for the financial services sector on outbound investments in overseas markets by Chinese nationals and corporations. These policies are generally regarded as the Qualified Domestic Institutional Investors (QDII) program in the market. The policies are summarised as follows: • commercial banks may conduct discretionary asset management business in overseas investments where RMB funds may be raised from corporations and individuals, which funds will be converted into foreign currencies and invested in overseas fixed income products; • qualified fund management companies or securities companies may raise foreign currency funds from corporations and individuals, which funds may be invested in overseas investment portfolios including equities; • qualified insurance companies may conduct overseas securities investment by converting RMB funds into foreign currencies and invest in fixed income products and money market instruments. So far three commercial banks have been issued with investment quota. The China Securities Regulatory Commission have just issued a consultation draft on the rules relating to collective asset management business by securities companies. These developments present significant opportunities to international fund managers in managing these assets or to play a sub-advisory role. In the long run, overseas foreign currency denominated fund products may be allowed to be offered directly in China.