2024-01-14 02:07:00
Data from the China Securities Regulatory Commission shows that a total of 81 institutions have been approved as qualified foreign institutional investors (QFII) in 2023, covering 15 countries, regions and international organizations around the world. The number of approvals is second only to the 118 in 2021.
Experts said that the increase in the number of QFII approvals reflects the confidence of foreign investors in my country’s macroeconomic and capital market development prospects, which is conducive to the high-quality development of my country’s capital market.
Optimistic regarding China’s market potential
Qualified foreign institutional investors are foreign institutional investors approved by the China Securities Regulatory Commission who use funds from abroad to invest in domestic securities and futures.
As of the end of 2023, 802 overseas institutions have been approved as qualified foreign investors, mainly overseas pension funds, sovereign funds, public funds, securities companies, insurance companies and commercial banks, etc., and have become important institutional investors in my country’s capital market. one.
A research report released by CICC in August 2023 shows that foreign investors mainly allocate A-share assets through the QFII/RQFII (Renminbi Qualified Foreign Institutional Investor) and Southbound Stock Connect mechanisms. The market value of A-shares held by foreign investors is approximately 3.5 trillion yuan, accounting for 3.8% of the total market value of A-shares and 9% of the free circulation market value. Among institutional investors, the shareholding ratio is second only to public funds and private equity funds. . The market value of foreign capital held through the QFII/RQFII mechanism is approximately 1 trillion yuan.
Tian Xuan, deputy dean of Tsinghua University PBC School of Finance, believes that foreign institutional investors are accelerating their deployment in China’s capital market. On the one hand, this is due to the continued recovery of my country’s economic vitality in 2023. Especially since the third quarter, various macro indicators have shown that my country’s economy is recovering and improving. The trend is obvious, and global investors are increasingly optimistic regarding China’s economic development. On the other hand, because the A-share market valuation has been at a historically low level, it is more attractive in the long term than overseas markets, so more overseas investors want to participate in China’s capital market.
“The large number and wide variety of QFII approvals in 2023 are the result of a combination of factors such as global economic recovery, China’s market opening, investment portfolio diversification requirements and improvement of the regulatory environment.” Tian Lihui, Dean of the Financial Development Research Institute of Nankai University, believes , while promoting market opening, my country has strengthened the supervision of capital markets, improved market transparency and predictability, and provided a better investment environment for foreign institutional investors.
It is worth mentioning that since the end of 2023, many foreign institutions, including Goldman Sachs and JPMorgan Chase, have been bullish on China’s economic growth in 2024 and recognized the investment value of China’s capital market. A Goldman Sachs report shows that the profits of A-share companies may be around 10% in 2024. In line with the effect of policy implementation, the returns of the MSCI China Index and the CSI 300 Index in 2024 may reach 17% and 19% respectively.
Admission channels continue to be smooth
As an important measure for the opening up of my country’s capital market, the QFII system was officially implemented in 2002. In recent years, the QFII system has been continuously optimized and improved, and has played a positive role in introducing overseas long-term funds, optimizing investor structures, guiding value investments, improving the governance of listed companies, and promoting the internationalization of the RMB.
In September 2020, the “Measures for the Administration of Domestic Securities and Futures Investments by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors” were released to further lower the entry threshold for qualified foreign investors and expand the scope of foreign investment in a steady and orderly manner.
In November 2023, the People’s Bank of China and the State Administration of Foreign Exchange revised the “Regulations on the Management of Domestic Securities and Futures Investment Funds by Foreign Institutional Investors” to further enhance the facilitation level of QFII/RQFII investment in China’s capital market.
“In recent years, my country’s capital market has accelerated its opening up to the outside world, and has continuously optimized the system from the top-level design, such as simplifying the qualification approval process for qualified foreign institutional investors, reforming relevant foreign exchange management policies, and lowering the threshold and cost of foreign investment entry.” AVIC Dong Zhongyun, chief economist of Securities Securities, said.
Experts generally believe that the continued “entry” of foreign institutional investors will have multiple positive effects on promoting the stable and healthy development of my country’s capital market. “Foreign-funded institutions usually have mature investment concepts and tend to be medium- and long-term holdings and value investments, which help optimize the investor structure of the domestic capital market and improve the governance level of listed companies through external supervision.” Tian Xuan said.
Dong Zhongyun also believes that foreign-funded institutions have more experience in corporate governance, product design, risk control, etc., and will bring advanced product development experience, risk control management tools and strategies to the domestic capital market, and enhance market maturity. At the same time, foreign-funded institutions will also bring incremental funds to the market, which will help improve market liquidity and guide the market’s investment style to change toward value investment and long-term investment.
Promote high-level institutional openness
The Central Financial Work Conference held in October 2023 proposed that efforts should be made to promote high-level financial opening up and ensure national financial and economic security. Adhere to equal emphasis on “bringing in” and “going out”, steadily expand institutional opening up in the financial sector, improve cross-border investment and financing facilitation, and attract more foreign financial institutions and long-term capital to develop businesses in China.
To attract more foreign investment institutions, Tian Xuan believes that the key is to improve the quality of my country’s listed companies. “The quality of listed companies is directly related to the attractiveness and competitiveness of my country’s capital market. Only by bringing actual returns to foreign-funded institutions can foreign assets be attractive during the growth period.”
Dong Zhongyun suggested that we should continue to optimize the opening-up system, promote interconnection with other countries and regions, relax restrictions on foreign investment entering my country’s capital market, provide more market access opportunities for foreign investment, and allow foreign investment to “come in.” At the same time, we will deepen capital market reform and improve market transparency by strengthening information disclosure supervision; guide listed companies to increase cash dividends and improve their ability to return investors; strictly enforce the delisting system, smooth delisting channels, and promote the liquidation of risky companies and other methods to provide foreign investment with a clear, stable, and predictable market environment so that foreign investment can be “retained.”
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