China expands QDII quotas on outbound demand

China's foreign exchange regulator on Wednesday night expanded quotas under an outbound investment scheme to meet the growing demand of domestic investors.

A total of US$10.3 billion in quotas was granted to 17 institutions under the Qualified Domestic Institutional Investor program, a scheme for outbound investment, according to the State Administration of Foreign Exchange.

Among these institutions were fund companies, securities firms, insurers, and banks, said the regulator, adding that the move brought China's total QDII quota to US$147.32 billion.

The quotas approved on Wednesday were the largest since the country implemented the QDII scheme in 2006.

Over the years, China has gradually normalized and accelerated the issuance of QDII quotas. Since September 2020, the SAFE has granted seven rounds of quotas to 173 institutions through the QDII scheme.

Under the QDII program, the country's cross-border capital flows have been maintained systematically, satisfying the rising demand for outbound investment at home, the SAFE said.

The faster pace of quota issuance could help diversify overseas asset allocations while building up the investment capabilities of domestic institutions, said Guan Tao, an economist with BOC International.

It also indicated that the authorities had adopted a combination of foreign exchange policies that aimed to increase the flexibility of exchange rates and expand the two-way opening up of the financial market in an orderly manner.

Amid efforts to further open up the financial market, China last year scrapped quotas on the dollar-denominated qualified foreign institutional investor scheme and its yuan-denominated sibling, RQFII.