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China Eases Rules, Widens US$222 Billion Inbound Investment Path, Offering The Renminbi As A Safe Haven Against Global Volatility

By Zhang Shidong
 
China’s yuan-denominated assets will get a fresh catalyst this month from some policy measures to give foreign stock and bond managers' wider access to the capital markets. That also means exposure to the second-best Asian currency in the past 12 months.
 
The central bank and market regulators have streamlined approval procedures for its inbound investment schemes, known by their QFII and RQFII acronyms, from November 1. They will also let foreign investors access a wider array of assets such as over-the-counter stocks, financial and commodity futures, and hedge funds, among others.
 
First announced in September, authorities will adopt universal criteria for approving foreign investors who apply for local currency to invest in the onshore market. The same will apply to investors seeking to deploy offshore yuan into local assets. They also promised to shorten the review process to 10 days from as long as 60.
 
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“That has lowered the entrance threshold and foreign inflows are expected to accelerate,” said Li Tianlu, an analyst at Capital Securities in Beijing. “It will increase the yuan’s appeal, and deepen market-oriented reforms in line with global practices.”
 
 
The measures will dismantle some barriers just as foreign interest is growing. Stocks and bonds are more appealing after they were added into global benchmarks tracked by the likes of MSCI, FTSE Russell, and JPMorgan Chase and the nation’s most valuable private companies including Ant Group come to the market.
 
Money managers have little to complain about so far. The yuan strengthened 1.5 percent in October. Last quarter, the local currency appreciated 3.9 percent, its best in more than a decade. Over the past 12 months, it has risen 5.4 percent, trailing the Taiwan dollar’s 6 percent gain, according to Bloomberg data.
 
Stock capitalization reached US$10 trillion for the first time since 2005, with the Shanghai Composite Index leading major world equity indices with a 9.7 percent gain, as the economy rebounded from the Covid-19-induced crash in the first quarter.
 
“China has been stepping up efforts to open its stock and bond market,” said Qin Peijing, an analyst at Citic Securities. “The implementation of the new rules will prompt foreign investors to be more actively involved in China’s multi-tier capital market.”