China’s State Administration of Foreign Exchange has increased the amount of money that approved investors can put into overseas assets. This marks the first increase since May of last year, signalling a relaxation of control over capital outflows. The foreign-exchange quota for qualified domestic institutional investors (QDII) rose to $US170.9 billion ($260 billion) at the end of June, up from $167.8 billion, according to the agency’s website.
The increase, which was anticipated by markets, comes as depreciation pressure on the yuan has eased due to a weaker US dollar. Demand for foreign assets, such as US stocks, has also cooled. The QDII program allows local institutional investors meeting specific criteria to invest in foreign securities, bonds, and commodities within set limits.
Interest from Chinese investors in overseas assets had surged in the past two years amid a slump in the local equity market. This high demand led to distortions in the prices of exchange-traded funds tracking global gauges such as the S&P 500 Index, as demand exceeded the quota-constrained supply.
The additional quota allocated to securities firms and fund houses increased by $2.1 billion. Banks received an additional $660 million, while insurance companies saw a rise of $300 million. The State Administration of Foreign Exchange manages China’s foreign exchange reserves and oversees cross-border capital flows. The QDII program aims to provide qualified domestic investors with access to overseas investment opportunities.
