China raises foreign funds investment limit on securities to $1 billion

With a view to attract more foreign investment, China, the world's third largest economy relaxed its rules over the weekend on foreign institutions making investments in the country's domestic stock market.

Oover the weekend, China's foreign exchange regulator raised the investment limit that a single qualified foreign institutional investor (QFII) can invest in the domestic stock market from $800 million to $1 billion with immediate effect.

The State Administration of Foreign Exchange (SAFE), in posting the new rules on its website over the weekend, said the easing of the rules was aimed at "attracting mid- and long-term investments."

SAFE also reduced the lockup period on investments made by qualified foreign pension funds, insurance companies, and mutual funds from one year to three months, while for other funds the lock-up period of one year will remain.

The revised rules says that the minimum quota for each application must be at least $50 million, but the regulator said, "SAFE can adjust the ceiling based on economic and financial trends, the supply and demand in the forex market, and the balance of payment situation."

Previously, China exercised tight capital controls restricting the movement of assets in-and-out of the country and did not allow foreign investors to invest in the country's mainland stock exchanges.