On October 30, with the approval of China Securities Regulatory Commission (“CSRC”), SZSE released the new revised edition of the Implementation Rules on Securities Trading of Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors on the Shenzhen Stock Exchange (the “Implementation Rules”), effective from November 1, 2020.
The rules for qualified foreign institutional investors (QFIIs) and RMB qualified foreign institutional investors (RQFIIs) (collectively called qualified foreign investors hereinafter) were put in place in 2002 and 2011 respectively. The two rules have played a positive role in introducing overseas long-term funds, optimizing the investor structure and promoting healthy development of the Chinese capital market. To better meet foreign investors’ demands and promote coordinated development of different open channels, SZSE has conscientiously implemented the requirements specified in the new revised edition of the Measures for the Administration of Domestic Securities and Futures Investment by QFIIs and RQFIIs and the Provisions on Matters Concerning the Implementation of the Measures for the Administration of Domestic Securities and Futures Investment by QFIIs and RQFIIs, and promptly revised the Implementation Rules accordingly.
The revision mainly includes: first, expanding investment scope. SZSE has added that qualified foreign investors are allowed to invest in depositary receipts, stock options, government-backed bonds, etc. and participate in bond repo, securities margin trading and refinancing securities lending transactions, to enrich qualified foreign investors’ toolkit for asset allocation and risk management. Second, improving shareholding ratio disclosure and excess shareholding reduction arrangements. With A-shares being included in internationally important indexes such as MSCI and FTSE Russell, foreign investors’ enthusiasm for and confidence in investing in A-shares have enhanced. To make it easy for relevant institutions to learn foreign shareholding ratios as early as possible so that they can have more time to react, SZSE has adjusted the disclosure indicator for foreign shareholding ratio from 26% to 24%, and optimized the shareholding reduction arrangements when total foreign shareholding ratio exceeds 30%. Third, facilitating investment operation. SZSE has removed the limit on the quantity of securities companies that foreign investors are allowed to commission, and specified the requirements for handling of transfer by agreement and non-deal name transfer of qualified foreign investors. SZSE has made full use of the internal information sharing mechanism of regulatory authorities and canceled the requirements for reporting of repetitive information to relevant institutions by qualified foreign investors and custodians, trusted securities companies, etc., to reduce the burden of market entities. Fourth, strengthening compliance requirements. SZSE has laid down the requirements for management of qualified foreign investors’ transaction behaviors and reporting of transactions suspected of violating laws and regulations by trusted securities companies and trusted futures companies, required qualified foreign investors to urge foreign investors under their names to fulfill information disclosure obligations, and added that the inspector shall fulfill the duty of supervision of qualified foreign investors.
Relevant official of SZSE said that SZSE would continue to facilitate the improvement of systems and mechanisms for high-level two-way opening up of the Chinese capital market according to the overall plan of CSRC, actively adapt to foreign investors’ demands, and constantly improve service capability and efficiency. SZSE will attract more medium- and long-term funds to the market, better energize market entities, go all out to build a quality innovation capital center and world-class exchange, and assist in the building of a higher-level open modern economic system.
