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Zhang Shidong

Beijing’s recent granting of new outbound investment allocations will help ease tight supply of cross-border investment products, including those invested in US securities, as Chinese investors look globally for diversification, according to analysts.
The foreign-exchange regulator granted US$6.84 billion of qualified domestic institutional investor (QDII) quotas to mutual-fund firms, insurers and banks’ wealth-management units in the latest round of approvals by the end of August, according to data released by the State Administration of Foreign Exchange.
Eighteen money managers, including China Asset Management and GF Fund Management, received allocations of US$100 million each, while more than 20 banks’ wealth-management arms were granted quotas for the first time.
Observers said the move shows that policymakers, after tightening scrutiny over non-compliant offshore assets, are making an effort to open up legitimate investment venues amid increasing demand for diversification.
“The expansion will help to ease tight supply of cross-border investment products and meet real and legal household demand for overseas asset allocations,” said Wu Jing, an analyst at China Galaxy Securities. “The release of quotas will add to product supply and rein in unreasonable premiums.”
The expansion fulfils the foreign-exchange regulator’s pledge in July to increase allocations of overseas investments to meet rising demand from Chinese investors, who are struggling with a prolonged decline in home prices and falling returns from fixed-income assets.
Demand for overseas financial products offered through official channels increased after Beijing cracked down on illegal offshore stock accounts opened by Chinese investors.


In addition to the Stock Connect programme that allows mainland residents to invest in Hong Kong stocks, QDII is the most popular channel for accessing foreign assets. It allows financial institutions to offer domestic investors fund products, mostly targeting overseas stocks, after getting foreign-currency quotas from the government.
Mainland mutual-fund firms have 337 QDII funds under their management, with the investments ranging from US and Hong Kong stocks to bonds and commodities, according to financial data provider Wind.
The best performer this year is an exchange-traded fund (ETF) investing in South Korea’s semiconductor stocks, logging a 76 per cent gain. The worst-performing funds are those targeting Hong Kong-listed tech stocks, with an average loss of nearly 30 per cent.
With new quotas in hand, some fund-management firms are loosening restrictions on subscriptions and launching new products.
China Universal Asset Management increased the daily cap for its QDII fund tied to global medical stocks to 80,000 yuan (US$11,900) from 2,000 yuan starting on Wednesday. Fullgoal Fund Management kicked off the sale of a new ETF tracking the Hang Seng Tech Index on Tuesday.
An increase in product supply may curb speculative trading of QDII funds on the secondary market. Such funds have frequently traded at substantial premiums to net asset values this year, triggering trading suspensions as warnings of investment risks.
By the end of August, China had approved a total of US$183 billion in QDII quotas for 196 financial institutions since the start of the programme in 2006, according to the official data.


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Expansion aims to ease tight supply of cross-border investment products following crackdown on non-compliant offshore investments


Expansion aims to ease tight supply of cross-border investment products following crackdown on non-compliant offshore investments.


China widens access to overseas stocks, handing out nearly US$7b in QDII quotas

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Expansion aims to ease tight supply of cross-border investment products following crackdown on non-compliant offshore investments

Expansion aims to ease tight supply of cross-border investment products following crackdown on non-compliant offshore investments