Regulators to raise QFII limit

China's foreign exchange regulator has removed the $1 billion limit set on purchases of Chinese assets that foreign sovereign wealth funds, central banks and monetary authorities can make through the Qualified Institutional Investor Program.

Shanghai Securities News said on Saturday that the change will add liquidity to the A share market and boost investors' confidence. The market has experienced a large amount of turbulence this year and declined by 60 percent from November 2007.

The new regulations, published on the State Administration of Foreign Exchange's website last Friday, did not specify a new top limit for investment.

But it made it clear that QFIIs can repatriate their principal and investment returns after a lock-up period ends, although the value of the monthly net remittances cannot exceed 20 percent of that of their total onshore assets during the previous year. The sovereign wealth funds Qatar Holding LLC just obtained approval from the State Administration of Foreign Exchange to invest up to $1 billion through QFII in November.

Chinese authorities have been working to make it easier for foreign investors to put money into China's stock market. The authorities raised the net quota for QFII to $80 billion in April, up from the $30 billion set in 2007.

By Nov 30, the administration had allocated $36 billion of the quota. Guo Shuqing, chairman of the China Securities Regulatory Commission, said earlier that the authorities will raise the quota further if the $80 billion is used up.

The combined value of foreign investments in China's stock market accounts for only 1 percent of the country's total market capitalization, Reuters said.