CHINA has further loosened controls over investment of Qualified Foreign Institutional Investors (QFII) to further the opening of the domestic capital market.

    China relaxed investment quotas for single institutions under QFII programs and allowed for more convenient capital flow, according a new policy released by the State Administration of Foreign Exchange (SAFE).

    The move aims to improve the convertibility of China’s currency, the yuan, in the capital account and facilitate cross-border investment and financing, the SAFE said.

    The yuan is convertible for trade purposes under the current account, while the capital account, which covers portfolio investment and borrowing, is still largely controlled by the state over concerns of abrupt capital flows in and out of the country.

    As part of the changes, the lock-up period for funds under the QFII program will be removed, allowing international investors to withdraw their money on a daily basis. Under current rules, based on the quota, these funds are subject to lock-ups of either a week or a month.

    The QFII program, launched by the government in 2002, allows foreign investors to buy or sell shares on stock exchanges in Shanghai and Shenzhen.

    The planned relaxation of rules comes at a time when China is battling to reverse currency outflows that have undermined the yuan and eaten into foreign exchange reserves. (SD-Agencies)