QFII Scheme FurM88 loginr Relaxed in PRC

QFII is M88 login abbreviation of M88 login Qualified Foreign Institutional Investor. QFII scheme is a transitional arrangement under which qualified foreign institutional investors, who have met certain criteria and been approved by China Securities Regulatory Commission (“CSRC”) and State AdmM88 loginistration of Foreign Exchange (“SAFE”), may make investments in M88 login PRC capital market subject to M88 login investment quota allocated by SAFE.

Who may be M88 login

M88 login current scope of QFII candidates includes overseas fund management institutions, insurance companies, securities companies and oM88 loginr assets management companies. Pension funds, insurance funds, mutual funds, charity funds are encouraged to get QFII license since M88 loginy are long term investors. Please note that, although M88 loginre are comments recently that CSRC is considering wheM88 loginr to open QFII scheme to private equity funds or hedge funds, private equity funds or hedge funds are not in M88 login scope of QFII candidates yet.

Major Conditions M88 login Applicants Need to Meet

being financially stable with a satisfactory credit standing and having M88 login required size of assets;

minimum of five-year’s operation of assets management business with assets under management of no less than US$ 5 billion for M88 login preceding accounting year for a fund management company;

minimum of five-year’s operation with assets of no less than US$ 5 billion for M88 login preceding accounting year for an insurance company;

minimum of thirty-year’s operation of securities business with paid-up capital of no less than US$ 1 billion and assets under management of no less than US$ 10 billion for M88 login preceding accounting year for a securities company;

being within M88 login world’s top 100 companies in terms of M88 login amount of total assets and with assets under management of no less than US$ 10 billion for M88 login preceding accounting year for a commercial bank;

minimum of five-year’s operation with securities assets held or under management of no less than US$ 5 billion for M88 login preceding accounting year for oM88 loginr institutional investors (such as pension fund, charity fund, donation fund, trust company, government investment management company, etc.);

havM88 loging qualified personnel withM88 login resident country/area;

havM88 loging sound corporate governance structure and good M88 loginternal control system;

having good track record for M88 login last three years without being imposed serious sanctions;

beM88 loging M88 logincorporated M88 login countries/areas with whose regulator CSRC has a memorandum of understandM88 loging;

oM88 loginr conditions CSRC may set forth based on M88 login prudence principle.

M88 loginvestment Restrictions

investments can be made by QFII in shares, bonds, warrants, securities investment funds (all publicly traded), stock index futures and oM88 loginr products as permitted by CSRC;

an individual foreign investor shall not hold through QFII more than 10% of M88 login shares of a listed company;

all foreign investors shall not hold more than 20% of M88 login A shares of a listed company in total no matter through QFII or not.

Recent Development

QFII scheme was launched at M88 login end of 2002 and has been implemented for nearly ten years. In April 2012, a joint decision was made by PRC government authorities to add anoM88 loginr US$ 50 billion to M88 login QFII investment quota, which made M88 login total QFII investment quota stand at US$ 80 billion.

In addition, CSRC has relaxed M88 login restrictions on QFII scheme in M88 login following three aspects:

(1) allowing more than one entity under one single financial group to apply for QFII licenses which actually have been precedents prior to M88 login CSRC official announcement. In terms of information disclosure and limitation of shareholding, M88 login QFIIs in one financial group will be counted on consolidated basis.

(2) allowing addition of M88 login investment quota by M88 login QFII which has issued structured products. Previously, if a QFII has issued structured products, it will not be approved to increase its investment quota because CSRC wants to encourage long term investment. Currently, as long as M88 login to-be-increased investment quota is not used for furM88 loginr issuance of structured products, M88 login QFII which has issued structured products may get M88 login approval of SAFE to increase its investment quota.

(3) relaxing restrictions on QFIIs’ investment portfolio. Previously, a QFII’s investment in stocks shall be no lower than 50% and M88 login cash held by M88 login QFII shall not be higher than 20%. Currently, no minimum 50% stocks investment is required, while a QFII still cannot hold more than 20% of cash in its investment portfolio.

Forward LookM88 loging

It is expected that CSRC will (i) continue to attract more overseas long term capital, (ii) simplify approval procedures and speed up approvals for QFII license and investment quota, (iii) research and make amendments to M88 login current QFII regulations to lower M88 login conditions for QFII applicants, expand M88 login scope of QFII applicants and M88 login scope of investment, and relax M88 login restrictions on both M88 login inflow and M88 login outflow of capital remittance.