China’s QDII2 to relax restrictions on overseas investment by individual investors


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Press reports a pilot scheme allowing individuals to invest up to half of their net assets overseas will be rolled out in six Chinese cities - Shanghai, Tianjin, Chongqing, Wuhan, Shenzhen and Wenzhou in June 2015 at the earliest.

The qualified domestic individual investor (part 2) scheme, which is referred to as QDII2, is a relaxation of the current limit on cross border capital flows of USD50,000 per year for an individual investor introduced in 2007. Individuals with more than RMB1 million (approximately USD160,000) in net assets on a daily basis would be allowed to freely purchase financial assets internationally, up to half of the value of their total assets.

It is also a relaxation in terms of the channels of overseas investment by individuals. The original QDII only allows domestic individuals to buy mutual funds, comprised of foreign stocks and bonds, issued by approved Chinese financial institutions.

Qualified individual investors will be allowed to invest mainly three types of assets, 1) securities including stocks, bonds, funds, insurance, foreign exchange and derivatives; 2) equity investment, including greenfield investments, mergers and acquisitions and joint investment, subject to the filing or approval of relevant authorities as required and 3) real estate investment.

Though details of the new plan have yet to be formally announced or scheduled, Shanghai could be the first to launch the implementation measures among all based on the comments of the local officials in early June.

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