To push ahead with capital account convertibility and promote cross-border investment and financing facilitation, the State Administration of Foreign Exchange (SAFE) recently released the Regulations on Foreign Exchange Administration for Domestic Securities Investments by QFII (Announcement No. 1 of the SAFE in 2016, hereinafter referred to as the Regulations) to reform the foreign exchange administration system for qualified foreign institutional investors (QFII).

The highlights of the Regulations include: first, easing the upper limit on the investment quota of a single QFII. The SAFE will no longer define a unified upper limit on the investment quota of a single institution and assign an investment quota (basic quota) to the institution in proportion to the size of its assets or assets under management (AUM). Second, simplifying quota approval management. A QFII's application for an investment quota that is within the basic quota will be subject to filing management, while the application for an investment quota that goes beyond the basic quota will be subject to SAFE approval. Third, further facilitating inward and outward remittances of funds. No requirements will be imposed on the deadline for the inward remittance of investment principal by a QFII. QFIIs will be allowed to subscribe and redeem open-end funds on a daily basis. Fourth, the lock-up period will be shortened from one year to three months, but the requirement that funds should be remitted out in batches and installments will remain unchanged, with the monthly total of outward remittance by a QDII no more than 20% of its domestic assets.