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Journal cover: Journal of Investment Compliance

Journal of Investment Compliance

ISSN: 1528-5812

Online from: 2000

Subject Area: Accounting and Finance

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China's QFII regime: a complete review of the regulatory scheme and compliance risks

Document Information:
Title:China's QFII regime: a complete review of the regulatory scheme and compliance risks
Author(s):Mark Shipman, (Based at Clifford Chance LLP, Hong Kong, China)
Citation:Mark Shipman, (2012) "China's QFII regime: a complete review of the regulatory scheme and compliance risks", Journal of Investment Compliance, Vol. 13 Iss: 3, pp.74 - 83
Keywords:China, China Securities Regulatory Commission, Institutional investor, Qualified foreign institutional investor, Regulation, Securities markets
Article type:Technical paper
DOI:10.1108/15285811211266173 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Acknowledgements:© Clifford Chance LLP 2012 This publication does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. Clifford Chance LLP.

Purpose – The paper aims to explain regulatory issues and considerations as to future regulatory changes that Chinese regulators may implement with regard to the Qualified Foreign Institutional Investor (QFII) regime.

Design/methodology/approach – The paper describes: the regulators responsible for QFII; the relevant regulations; the qualification process, including eligibility requirements and the regulators' preference for qualifying long-term, buy-side institutional investors (usually pension funds, insurance companies and mutual funds); the concept of the “open-ended China fund”; rules governing the remittance and repatriation of capital and the lock-up period; a provision that prohibits QFIIs from transferring or selling their quotas (for example, to create structured products offering their customers synthetic exposure to the Chinese securities market); available account structures; the investment process, including investment restrictions, required disclosure of interests, the short swing profit rule, over-purchases and erroneous trades, stock index futures trading, and insider dealing and manipulation of the market; withholding taxes; and recent developments.

Findings – China's QFII regime has been a key component of China's staged opening up of its financial markets, in particular its public securities market, permitting foreign investors to gain access to the previously restricted RMB denominated A share market under relatively strict regulatory oversight.

Originality/value – Practical guidance from an experienced financial services lawyer is provided.

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