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Print articleChina: China QDII Product Invests in Offshore Equity Funds
March, 2007 -
A Chinese commercial bank recently launched an investment product under the Qualified Domestic Institutional Investors scheme (QDII) which takes in Renminbi funds from mainland investors and invests in offshore equity funds, fixed income instruments and money market products denominated in foreign currencies. This is an important breakthrough as previously QDII products from banks only invested in fixed income instruments. In the offering document of this QDII product, two offshore equity funds that focused on China and greater China equities are named as underlying investments. The selection criteria for investment in equity funds is described as:
i. funds investing in H shares, red chips and Hong Kong stocks;
ii. being open-ended funds with a fund size over US$200 million;
iii. the historical performance of such funds will also be considered.
The QDII scheme for banks was introduced last year to allow mainland investors invest overseas. Though it has not been as popular as anticipated given the limited investment scope, this "liberalisation" potentially makes QDII products more attractive and may encourage the outflow of foreign currency through such funds. The State Administration of Foreign Exchange announced in January this year an increase in the permitted amount of foreign currency fund conversion by a Chinese individual to USD50,000 per annum (from USD20,000). Such funds may be used to purchase QDII products offered by commercial banks or fund management companies in China.
i. funds investing in H shares, red chips and Hong Kong stocks;
ii. being open-ended funds with a fund size over US$200 million;
iii. the historical performance of such funds will also be considered.
The QDII scheme for banks was introduced last year to allow mainland investors invest overseas. Though it has not been as popular as anticipated given the limited investment scope, this "liberalisation" potentially makes QDII products more attractive and may encourage the outflow of foreign currency through such funds. The State Administration of Foreign Exchange announced in January this year an increase in the permitted amount of foreign currency fund conversion by a Chinese individual to USD50,000 per annum (from USD20,000). Such funds may be used to purchase QDII products offered by commercial banks or fund management companies in China.
