State Administration of Foreign Exchange photo: VCG

China's State Administration of Foreign Exchange (SAFE) on Wednesday granted 17 financial institutions a total qualified domestic institutional investor (QDII) quota of $10.3 billion, in a routine move to facilitate the country's two-way capital market opening-up.

The 17 financial institutions include funds, securities firms, banks and insurers. 

To date, the SAFE has approved QDII quota applications from 173 institutions totaling $147.32 billion, the agency's website said.

The QDII program is a quota-based system through which Chinese mainland-based institutions can buy shares in foreign companies through mutual funds. It is a transition mechanism, as China's capital market has not yet fully opened up. Along with the qualified foreign institutional investors (QFII) and renminbi QFII, it is an important mechanism in the Chinese capital market's two-way opening up.

The expansion of China's QDII quota comes as public funds are rolling out relevant products to meet Chinese residents' demand for investing overseas. 

The SAFE has been releasing QDII quotas in a routine and regular way since September 2020. Previously, six rounds of QDII quota were approved by the regulator.

"China's move to grant additional QDII quota shows the government's confidence and determination to achieve stable economic growth and tackle a complicated external environment. It is also conducive for meeting domestic investors' needs for diversifying overseas asset allocation," a SAFE official was quoted as saying in the statement.

The official also noted that it provides a chance for domestic financial institutions to improve their overseas investment capacity, and it will promote further development of the cross-border asset management industry. 

The SAFE official suggested that QDII institutions should conduct overseas investment business in an orderly manner, as the uncertainty of the global political environment is rising in the post-virus era, and the global financial market could also be subject to greater fluctuations. 

"QDII institutions should make operational decisions in a prudent way, promote the diversification of their investment, and optimize overseas asset allocation to control risks effectively," the official said. 

Global Times