China will scrap the approval and quota system and allow all legal institutions, on and offshore, to participate in the Qualified Domestic Institutional Investor (QDII) and Qualified Foreign Institutional Investor (QFII) programs when the time is ripe, central bank chief Zhou Xiaochuan said, according to a Caixin report Thursday.
Regulators will further expand the quota and ease the thresholds for widening the market access, Zhou was quoted as saying in the central bank’s 2013 annual report.
China will also step up efforts to make its currency, the renminbi or yuan, convertible under the capital account, a significant move in tackling major economic problems the country faces, the report says.
The People’s Bank of China is also considering establishing linkages between domestic and overseas equity markets, and gradually relaxing the restrictions on overseas agencies’ issuance of renminbi bonds.
China launched the QFII scheme in 2012 to allow licensed foreign investors to use offshore yuan for investing in the country’s capital market. The QDII program was launched earlier in 2006 to allow domestic funds to be invested abroad.
China’s M2 money supply increased 13.6 percent year-on-year in 2013, and financial institutions issued new yuan loans amounting to 8.89 trillion yuan. The nation’s social finance aggregate reached 17.29 trillion yuan last year.
“Both loans and social financing have expanded too rapidly in the first few months of last year, but the trend has been contained effectively. The annual CPI rose by 2.6 percent, which is line with our expectation,” Zhou was quoted saying.
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