Global funds no longer need approvals to purchase quotas to buy Chinese stocks and bonds, the State Administration of Foreign Exchange said in a statement, removing the $300 billion overall cap on overseas purchases of the assets, reported Bloomberg.
It’s the latest push by Chinese authorities to increase use of the RMB in international transactions, and comes as they seek out more foreign capital to balance payments. Scrapping the investment quota is also another step in policy makers’ efforts to open up China’s financial system to the world.
It’s unclear how much fresh investment the latest moves will attract into China’s $13 trillion bond and $6.9 trillion equity markets, given that foreign investors had only used $111 billion of the $300 billion quota available to them through Aug. 30. There are also alternate routes of investment, including trading links with Hong Kong Exchanges & Clearing Ltd., that allow offshore money managers to trade stocks and bonds in China via Hong Kong.
Foreign investors held RMB 2 trillion of Chinese bonds and RMB 1.6 trillion of stocks onshore at the end of June, according to central bank data. FTSE China A50 futures rose as much as 0.6% in Singapore on the scrapping of the limit.