China is looking to open its doors to foreign pension funds, giving them room to invest in Chinese capital markets in the future. The Wall Street Journal, citing unnamed sources, notes that the new channel would be separate from the existing Qualified Foreign Institutional Investor program. The country may also introduce a specialized Qualified Domestic Institutional Investor plan to let wealthy investors buy Hong Kong stocks directly.
China in recent years has sought to open up its capital markets as it reaches out for more institutional investors such as pensions. This at the same time as the government is discussing tax reductions to encourage their investments, the China Securities Regulatory Commission said in a May 7 statement on its website.
“It may be possible that we’ll see a separate program, but really they are trying to achieve their quest to attract more long-term foreign institutional capital to open the Chinese market,” said Hubert Tse, partner at Chinese law firm Boss & Young in Shanghai who advises QFIIs, QDIIs, global hedge funds and private equity funds in China. “Now that they are increasing the inflow with QFII, they will need to balance the outflow by expanding the QDII.”
Retirement funds in Taiwan, Hong Kong and Singapore without QFII licenses may be among the first to be allowed to invest under the new system, the Wall Street Journal reported. Six overseas pension funds have won QFII licenses with a combined quota of $750 million, according to the statement. Another channel is for them to buy products issued by QFIIs, the CSRC said in the May 7 statement.
The initial size of the expanded QDII plan could be as much as about $50 billion, Ming Pao said.