Sluggish Shanghai delays QDII reforms
China has postponed indefinitely a scheme
that would have opened the Hong Kong
stock market to legal investments by mainland
institutions. The Qualified Domestic
Institutional Investor (QDII) would have
allowed some mainland funds to convert
their yuan into hard currency in order to
invest in the Hong Kong stock market, depressing prices further.
The move will come as a disappointment
to the Hong Kong government, which first
proposed the scheme as a way of invigorating
the territory's sluggish economy by integrating
it more closely with the mainland's.
More broadly, it represents a setback to
introducing a more flexible exchange rate
mechanism for the yuan and addressing US
concerns over China's record US$103bn
trade surplus last year. The scheme was conceived
as a counterpart to the Qualified Foreign
Institutional Investor plan, which opened
the flow of foreign funds into Chinese stock
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