China is moving to encourage domestic institutional investors to pour more money into foreign capital markets as the RMB appreciates strongly against the dollar amid accelerating post-pandemic inflows of funds, reported Caixin.
The foreign exchange regulator will start issuing about $10 billion new Qualified Domestic Institutional Investor (QDII) quotas in several batches, an official from the State Administration of Foreign Exchange (SAFE) said Wednesday at an industry seminar. The annual total would represent a 10% expansion of the program. The agency issued $3.36 billion of new quotas last month, the first in a year and a half.
The RMB is trading at its highest levels in more than two years, fueling expectations that Beijing would move to rein in the surge. The currency climbed as much as 0.55% Wednesday to its strongest since July 2018. The yuan gained almost 5% over the past three months.
The QDII program was launched in 2006 to allow qualified domestic institutions to invest in overseas capital markets. These include commercial banks, insurance companies, securities firms and fund managers. They act as conduits for channeling funds into offshore investments, which could increase demand for the US dollar.