Access to China Market

QFII & RQFII introduction

Currently, the China capital markets offer limited access to foreign investors. Under current regulations in China, foreign investors can invest only in the domestic securities market through certain foreign institutional investors that have obtained Qualified Institutional Investor (“QFII”) or a Renminbi Qualified Institutional Investor (“RQFII”) status from the CSRC and have been granted a quota by SAFE to remit foreign freely convertible currencies (in the case of a QFII) and RMB (in the case of a RQFII) to China for the purpose of investing in the China’s domestic securities markets.

Main Comparison between QFII & RQFII

  RQFII Mutual Funds QFII Mutual Funds
Lock-up period N/A 3 months
Repatriation frequency Daily: real time inflow and outflow Weekly
Aggregate granted quota RMB 311.50 billion USD 69.72 billion

Source: State Administration of Foreign Exchange ("SAFE"), as of 28 February, 2015.

RQFII Development

Shanghai – Hong Kong Stock Connect

In addition to QFII and RQFII schemes, foreign investors can also get access to eligible shares listed on Shanghai stock exchange from 17 November 2014 through “Shanghai-Hong Kong Stock Connect”. All Hong Kong and overseas investors can trade Shanghai Stock Exchange (“SSE”) Securities through Shanghai-Hong Kong Stock Connect.

Under Shanghai-Hong Kong Stock Connect, the Stock Exchange of Hong Kong Limited (“SEHK”), and SSE will establish mutual order-routing connectivity and related technical infrastructure (Trading Links) to enable investors in their respective markets to trade shares listed on the other market.

A glimpse of the Shanghai – Hong Kong Stock Connect

  Southbound Trading (investing in SEHK) Northbound Trading (investing in SSE)
Aggregate Quota
(100 million RMB)
2500 3000
Daily Quota
(100 million RMB)
105 130
Qualified Investors Institutional Investors, or Individual investors who hold an aggregate balance of not less than RMB500,000 in their securities and cash accounts Institutional investors & individual investors
Eligible Securities for Trading Constituent stocks of the Hang Seng Composite LargeCap Index Constituent stocks of the Hang Seng Composite MidCap Index. Stocks listed on both SEHK(H share) and SSE(A share) Constituent stocks of SSE 180 Index
Constituent stocks of SSE 380 Index
Stocks listed on both SEHK(H share) and SSE(A share)
Trading and clearing Rules Shanghai-Hong Kong Stock Connect will only operate on a day which is a trading day of both SSE and SEHK and where the clearing arrangements are in order. ChinaClear and HKSCC will establish a direct link for cross--boundary clearing. Each of them will become each other’s clearing participant to provide clearing services for Shanghai-Hong Kong Stock Connect.

*Facts are subject to change, as of 31 December, 2014.