China unveils biggest upgrade of foreign investor rules since 2020 to boost long-term inflows

China has unveiled the most comprehensive upgrade of its qualified foreign institutional investor programs since 2020, showcasing the country’s commitment to attracting foreign investors – particularly allocation-based, long-term ones – to participate in its capital market with greater intensity.

The reform represents a key milestone in China’s steady drive to advance institutional opening-up, amid a growing consensus that the Chinese capital market has become one that international investors can no longer afford to ignore in their global portfolio strategies.

According to a work plan released on Monday by the China Securities Regulatory Commission, or CSRC, the country’s top securities regulator, the qualified foreign institutional investor system will be optimized in key areas to address foreign investors’ key concerns, including improving market access, facilitating investment operations, broadening investment scope, and clarifying policy expectations.

Major new initiatives will include allowing qualified foreign investors to use exchange-traded fund options for risk management, expanding their access to commodity futures and options trading, and unifying short-term trading rules to ensure equal treatment for foreign and domestic institutions.

The CSRC said in a statement that the plan, announced by CSRC Chairman Wu Qing on Monday, is aimed at implementing reform measures within about two years, to enhance the appeal of China’s capital market to long-term overseas funds.

Other key steps in the plan include supporting domestic providers of investment advisory services in serving overseas investors, integrating qualification approval with account opening under a single streamlined procedure, establishing a green channel for allocation-oriented capital inflows, and unifying standards for algorithmic trading for domestic and foreign institutions.

“The plan seeks to foster a new pattern of opening-up characterized by coordinated and complementary onshore and offshore investment channels, balanced development between allocation-oriented and trading-oriented capital, and positive interaction among domestic and overseas securities, fund and futures institutions,” the commission said.

So far, the country has 913 qualified foreign institutional investors, whose assets under management onshore have exceeded 1 trillion yuan ($140.7 billion).