BEIJING (REUTERS) - China will soon relax rules for qualified foreign investors when they channel their offshore yuan holdings into China's securities market, the official Xinhua news agency said on Sunday.

Under the revised rules, Renminbi Qualified Foreign Institutional Investors (RQFII) will no longer be required to put at least 80 per cent of their funds into the domestic fixed income market, Xinhua said, citing market regulator, China Securities Regulatory Commission.

"It means there will be more funds entering the (onshore)stock market," Xinhua said, adding that the market regulator has already finished modifying the rule.

The new rule, which will be implemented soon, will allow more institutional investors to join the scheme, which is currently limited to securities brokerages and investment funds, Xinhua said, without naming a date.

China introduced the RQFII scheme with an initial quota of 20 billion yuan (S$3.97 billion) in late 2011, with each firm allowed to put no more than 20 per cent in the onshore stock market and the remainder invested in fixed income.

The quota was raised by 50 billion yuan last April, with the entire amount to be invested in the stock market through exchange-traded funds (ETFs).

Mr Guo Shuqing, the head of the China Securities Regulatory Commission (CSRC), said in late 2012 that the RQFII quota would be raised by a further 200 billion yuan, although he gave no specifics on how the quota would be allocated or what products could be purchased.