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New China Provisions on Domestic Securities Investments by QFII

For the purpose of further implementation of the Regulations on Domestic Securities Investments by Qualified Foreign Institutional Investors (“QFII Regulations”), the China Securities Regulatory Commission (CSRC) issued the Provisions on Certain Issues Concerning the Implementation of the Regulation on Domestic Securities Investments by Qualified Foreign Institutional Investors (“QFII Provisions”) on July 27, 2012, which took effect the same day. 

Qualified Foreign Institutional Investor (QFII) is a program launched in 2002 in People's Republic of China to allow licensed foreign investors to buy and sell “A” shares in China’s mainland stock exchanges. Currently, the effective rules on QFII are the QFII Regulations and the QFII Provisions. 

I. Threshold of an Eligible QFII 

The QFII Provisions set up separate thresholds for different types of enterprises: 

(1) For an assets management institution, its existing operation period for assets management shall be more than two years and the securities assets under its management for the latest accounting year shall be no less than USD 500 million; 

(2) For an insurance company, it must exist for more than two years and must have held securities assets for the latest accounting year in an amount not less than USD 500 million; 

(3) For a securities company, its existing securities operation period shall be more than five years and with more than USD 500 million net assets, and the securities assets under its management for the latest accounting year shall not be less than USD 5 billion; 

(4) For a commercial bank, its existing banking operation period shall be more than ten years, with tier-one capital of no less than USD 300 million, and the securities assets under its management for the latest accounting year shall be no less than USD 5 billion; and 

(5) For other institutional investors (for example, a pension fund, a charity fund, an endowment fund, a trust company or a government investment and management company), they must be in existence for more than two years, and the securities assets under its management or held by it for the latest accounting year shall be no less than USD 500 million. 

II. Limitations on the Proportion of Shareholding 

The QFII Provisions impose some restrictions on a foreign investors’ proportion of shareholding in a listed company through the QFII: 

(1) with respect to a single foreign investor holding the shares of a listed company through a QFII, the proportion of the shareholding shall not exceed 10 percent of the total amount of the shares of the company; and 

(2) the total amount of “A” shares held by all foreign investors in a single listed company shall not exceed 30 percent of the total amount of the shares of this listed company. 

On the other hand, strategic investment to a listed company by an outbound investor shall not be subject to the said restrictions. 

III. Multiple choices of Domestic Securities Companies 

Each QFII may authorize up to three domestic securities companies to conduct securities trading separately in Shanghai Stock Exchange and Shenzhen Stock Exchange. 

  • Provisions on Certain Issues Concerning the Implementation of the Regulation on Domestic Securities Investments by Qualified Foreign Institutional Investors  
  • Issuing Authority: the China Securities Regulatory Commission 
  • Date of Issuance: July 27, 2012 / Effective date: July 27, 2012 
©2023 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume II, Number 360
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About this Author

George Qi, Greenberg Traurig Law Firm, Shanghai, Corporate and Finance Law Attorney
Shareholder

George Qi is the Co-Managing Shareholder in the firm's Shanghai office. He practices primarily in China-related cross- border mergers and acquisitions, foreign direct investment and general corporate matters. He also has wide- ranging experience advising both U.S. and non-U.S. companies relating to internal investigations of FCPA or other regulatory violations.

Areas of Concentration

  • Corporate

  • Compliance

  • Foreign Corrupt Practices Act...

86021-6391-6633
Dawn (Dan) Zhang, Greenberg Traurig Law Firm, Shanghai, Corporate Law Attorney
Shareholder

Dawn (Dan) Zhang is Co-Managing Shareholder of the Shanghai Office and has broad experience advising clients on China-related cross-border mergers and acquisitions, restructuring, joint ventures, funds, and general corporate matters. Before joining Greenberg Traurig, Dawn practiced in other international law firms for many years and served as the PRC legal counsel for a multinational corporation, where she handled a wide variety of corporate matters for public and emerging growth companies. Dawn passed the national PRC judicial qualification examination in 1998 and is...

8621-6391-6633
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