, the nation's central bank, has approved three Qualified
Foreign Institutional Investor (QFII) custodians: the Industrial and Commercial
Bank of China, Agricultural Bank of China, and
Bank of
China,
Securities Daily reported.
The other four banks who have also submitted applications for
custodianship -- Bank of Communications, Hongkong and Shanghai
Bank, Standard Chartered and City Bank -- are still waiting for
approval.
But central bank's approval does not mean these banks can
immediately carry out QFII business, for it still needs nod from
China Securities Regulatory Commission and State Administration of
Foreign Exchange.
Sources with securities watchdog say that the applications are
under scrutiny, and final result will be released in several
days.
According to the procedures, an overseas institution can begin QFII
operation through custodians once the custodianship was approved.
Central bank's approval means a step closer for foreign investors
to entering China's securities market.
Experts say that increasing QFII operations can strengthen the
supply of long- and medium-term capital, boost investors'
confidence, and enhance the international influence of China's
securities market as well.
It
also helps strengthen the team of institutional investors, improve
the performance of listed companies, adjust market structure,
improve investment notion, and promote the formation of stock
culture in capital market.
China formally introduced the long-awaited QFII scheme on December
1, 2002. The scheme enables qualified foreign investors to invest
in A shares listed in Shanghai and Shenzhen, treasury and corporate
bonds and other financial instruments.
However, there are still lots of restrictions. First, foreign
investors have to set up a special Renminbi account in a custodian
bank, and use domestic securities companies for trading.
Second, applicants have to submit lots of documents, including
accounting reports, operational procedures, risk and returns
assessments, risk control measures, commitment for medium and
long-term investment.
Last, each licensed foreign investor can only acquire up to 10
percent of stocks in a domestic listed firm. Every investment has
to be in line with the guidelines set by the government over the
ratio of foreign investment in different industries.
Economists say that it is only a transitional measure before the
Renminbi becomes fully convertible under the capital account and
such restrictions will be gradually loosened.
(china.org.cn by Tang Fuchun, January 9, 2003)