By Lin Guan (chinadaily.com.cn)
Updated: 2007-12-19 10:29

China will allow its commercial banks to extend their qualified domestic institutional investor (QDII) portfolios to the UK and US stock and fund markets, months after the Hong Kong financial market became accessible, Shanghai Securities News reported.

Special Coverage: Markets Watch   Related readings:  QDII investment likely to go to US, EU stock markets  QDII products totter as international stocks drop Insurance QDII to officially launch business  China's QDII quota hits US$42.17b by end-September

According to an announcement by the China Banking Regulatory Commission (CBRC), Chinese and UK authorities signed an agreement on QDII regulatory cooperation yesterday, subsequently opening the UK stock and fund markets to Chinese banks under the QDII program.

In a CBRC statement, the watchdog said a similar agreement with the US financial regulator will be reached soon. The CBRC has signed a memorandum on the QDII program with the US authority in the second half of the year.

A CBRC executive said the gradual expansion of the QDII investing scope would enable commercial banks to acquire international investment management expertise and enhance their risk management ability. By diversifying investment channels, domestic individual investors are able to enjoy gains from a wider range of global markets, thus reducing potential risks.

Financial experts said the new move is likely to make bank QDII products more popular. However, another CBRC executive noted the new policy doesn't mandate banks to invest in the newly-opened markets; banks can make their own decision on whether to invest in these markets or not and how to arrange their portfolios.

China approved across-boarder investment of commercial banks under the QDII program this May. To date, 23 domestic and foreign banks have received a total of $16.1 billion in QDII investment quota. However, as of the end of October, a merely 35.2 billion yuan ($4.40 billion) or 29 percent of the total quota was used under 154 QDII products in 16 banks, the newspaper reported.