China
has stalled the expansion of the Qualified Foreign Institutional Investor (QFII) scheme
because of concerns about its use by investment banks for currency speculation, according
to a story in the Financial Times.
The central government has significantly
restricted the amounts foreign investment banks can put into the market on behalf of clients
over the past month.
The tough line on currency inflows has been
enforced by the State Administration of Foreign Exchange (SAFE), which must approve all
official flows of money in and out of China.
QFII, which was launched late
last year, allows foreign investors to participate in initial public offerings, share placements,
and the Chinese RMB denominated A-share market.
To date, nine
investment banks have received approval for a license to invest on behalf of their clients.
The total amount of funds approved is between less than US$1 billion, equal to about a
single’s day turnover on the Shanghai and Shenzhen stock markets.