The State Administration of Foreign Exchange (SAFE) has issued the Foreign Exchange Administrative Measures on Investment in Domestic Securities by Qualified Foreign Institutional Investors(合格境外机构投资者境内证券投资外汇管理规定) (New QFII Rules), which came into effect on 3 February 2016 and replaced the old rules of December 2012. SAFE stated that the objective is to facilitate cross-border investments. The New QFII Rules benefit foreign investors by simplifying the administration of investment quotas, the lock-up period and the capital remittance and repatriation arrangements.

1. Administration of investment quotas

Under the New QFII Rules, a concept of “basic quota” has been introduced, which will be calculated according to formulas provided in the New QFII Rules based on the existing onshore or offshore AUM of a QFII or its group. If the quota applied for is within the basic quota range, a QFII need only make a filing with SAFE. The range of basic quota is USD 20 million to USD 5 billion. For quota in excess of USD 5 billion, SAFE approval is required.

2. Lock-up period

The lock-up period for the investment principal has been reduced from one year to three months, and commences on the day the accumulative remitted amount reaches US$20 million.

3. Principal injection

There is no prescribed requirement regarding the period of principal injection. However, if a QFII fails to effectively utilise the investment quota within one year after the date of filing or approval, SAFE may cancel all or part of the unutilised investment quota.

4. Capital repatriation

The accumulated monthly net capital repatriation by a QFII is still subject to 20% of its total onshore assets at the end of the preceding year. With respect to open-ended funds, the subscription and redemption can be handled on a daily basis, which is in line with RMB QFII rules.

The New QFII Rules reflect China’s continued efforts to open the financial markets and to promote participation by foreign investors. SAFE's announcement and the New QFII Rules (currently in Chinese only) are available from the SAFE website.