China eyes hiking foreign investment quota for markets

HONG KONG (AFP) - China could increase 10-fold the quota for foreign investors putting money into the country's stock markets, the head of its securities regulator said on Monday.

Foreign institutions - individuals are barred - can at present buy shares in the world's second-largest economy through two programmes, the main one being the Qualified Foreign Institutional Investors, or QFII, scheme.

The programmes together account for "just 1.5 or 1.6 per cent" of China's A-share market, China securities regulatory commission chairman Guo Shuqing told an economic forum in Hong Kong.

The A-share market refers to stocks denominated in the domestic yuan currency, also known as the renminbi.

"I think at least we can increase 10 times," he told about 2,000 business and government leaders attending the Asian Financial Forum organised by the Hong Kong government and the city's trade development council. He did not elaborate.

By the end of last year, China had granted 169 institutions more than US$37 billion (S$45 billion) in QFII quotas since the start of the scheme in 2002, according to official figures.

Mr Guo's comments sparked a market rally with the nation's benchmark Shanghai Composite Index ending the day 3.06 per cent higher.

They followed a string of reforms aimed at opening up financial markets and boosting the economy, while allowing state-run banks and huge public companies to still play a prominent role.

Last July, the securities regulator eased restrictions on foreign investors by allowing qualified institutional investors to hold up to 30 per cent of shares in any domestically listed company, up from 20 per cent.

The new rules also aimed to make it easier for foreign groups to obtain the status of qualified institutional investor, and thus enter the Chinese market.

The regulator said at the time that the steps were part of efforts to lead to "more long-term foreign investment on China's capital markets".