April 13, 2018 / 5:39 AM / a year ago

China starts vetting applications for new QDII quotas - sources

SHANGHAI, April 13 (Reuters) - China’s foreign exchange regulator has resumed vetting quota applications under the Qualified Domestic Institution Investor (QDII) scheme, two industry sources said, signaling a resumption of the outbound investment scheme after a three-year hiatus.

China unofficially suspended QDII in 2015 when gyrations in Chinese stock and currency markets prompted capital flight. Over the past year, Chinese equities have steadied while the yuan has gained sharply against the U.S. dollar.

The State Administration of Foreign Exchange (SAFE) on Wednesday held a meeting with major financial institutions, including banks, insurers and mutual fund houses, inviting them to submit applications for QDII quotas, said the two sources with direct knowledge of the meeting.

The meeting was first reported on Thursday by the official Securities Times.

One source, at a major state-owned insurance company, expected new quotas to be granted as early as this month, while the other source, at a mutual fund house, declined to forecast a timetable.

The quota each institution will be granted will be tied to the size of its domestic assets under management, as well as its overseas investment capabilities, a source said.

SAFE did not have an immediate response to faxed questions.

The QDII resumption comes amid a broader deregulation of China’s financial sector. President Xi Jinping vowed earlier this week to open Chinese markets further, easing fears of a full-blown trade war between Beijing and Washington.

The QDII scheme was created in 2006 to allow domestic investors to put money into overseas financial markets. About $90 billion in investment quotas have been issued so far to China’s financial institutions.

Earlier this year, China resumed Qualified Domestic Limited Partnership (QDLP), another outbound investment scheme. (Reporting by Samuel Shen and John Ruwitch; Editing by Sam Holmes)

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