China is set to indefinitely postpone
the landmark Qualified Domestic Institutional Investor (QDII) scheme that would have
allowed mainland institutions to exchange their RMB and invest it in Hong Kong's capital
markets, according to a story in the Financial Times.
Securities Regulatory Commission (CSRC) opposed the scheme because of fears that it
would divert funds away from Shanghai's underperforming stock market and possibly
drive stock prices even lower.
The delay of the QDII scheme rules out one
of the options for China to increase flexibility of its exchange rate as it faces increasing
pressure from the US and other countries to allow the RMB to appreciate.