Qualified Foreign Institutional Investor - QFII

DEFINITION of 'Qualified Foreign Institutional Investor - QFII'

A program that permits certain licensed international investors to participate in China's mainland stock exchanges. The Qualified Foreign Institutional Investor program was launched by the People's Republic of China in 2002 to allow foreign investors access to its stock exchanges in Shanghai and Shenzhen. Prior to QFII, foreign investors were not able to buy or sell shares on China's stock exchanges because of China's tight capital controls. With the launch of the QFII program, licensed investors can buy and sell yuan-denominated "A" shares. Foreign access to these shares is limited by specified quotas that determine the amount of money that the licensed foreign investors are permitted to invest in China's capital markets.

BREAKING DOWN 'Qualified Foreign Institutional Investor - QFII'

As of April, 2012, the combined quota for the Qualified Foreign Institutional Investor program was set at U.S. $80 billion. The quotas are granted by SAFE - China's State Administration of Foreign Exchange, and the quotas can be adjusted to reflect and respond to the country's economic and financial situation. Type of investments include listed stocks (excluding foreign-oriented, or "B" shares); Treasury bonds, corporate debentures and convertible bonds, and other financial instruments approved by the China Securities Regulatory Commission (CSRC). To be approved as a licensed investor, certain qualifications must be met (qualifications are dependent upon the type of investor - such as fund management companies and insurance companies). For example, fund management companies are required to have a minimum of five years of experience in assets management and must have managed at least U.S. $5 billion in securities assets in the most recent accounting year. A specified amount of foreign currency, transferred and converted to local currency, is also required for approval.

RELATED TERMS
  1. China's State Administration Of ...

    China's foreign exchange regulatory agency, which functions as ...
  2. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock ...
  3. A-Shares

    Shares in mainland China-based companies that trade on Chinese ...
  4. China Concepts Stock

    The stock of a company whose assets or earnings have significant ...
  5. Foreign Exchange Reserves

    Foreign exchange reserves are reserve assets held by a central ...
  6. Qualified Domestic Institutional ...

    An institutional investor that has met certain qualifications ...
Related Articles
  1. Investing

    China’s Stock Markets vs U.S. Stock Markets

    The U.S. and China are home to the biggest stock markets in the world, but they are very different in a number of important ways.
  2. Investing Basics

    Learning About the Shanghai Stock Exchange

    The Shanghai Stock Exchange is mainland China’s largest stock exchange.
  3. Investing Basics

    Explaining Foreign Exchange Risk

    Foreign exchange risk is the chance that an investment’s value will decrease due to changes in currency exchange rates.
  4. Economics

    What Is a Quota?

    In business, quota usually refers to the sales target for a salesperson or a sales team.
  5. Economics

    Top 4 Ways to Invest in Chinese Bonds

    Investing in Chinese bonds isn't easy, but it is possible. Here's how.
  6. Investing Basics

    Broadening Your Portfolio's Borders

    Find out what type of international fund might suit your needs in gaining exposure to foreign markets.
  7. Investing

    How To Trade Foreign Stocks

    We weigh the major ways to trade foreign stocks for investors.
  8. Economics

    Ever Wanted to Own International Stocks? Here's How

    Tips and strategies for users to trade in different exchanges around the world.
  9. Savings

    Should You Open A Foreign Savings Account?

    Would opening a savings account in a foreign bank make sense for you? The pros and cons, how to establish one – and alternatives to consider.
  10. Forex Education

    The 3 Biggest Risks Faced By International Investors

    Investing internationally is a great way to diversify your portfolio, but you need to know the risks.
RELATED FAQS
  1. How can I invest in a foreign exchange market?

    The foreign exchange market, also called the currency market or forex (FX), is the world's largest financial market, accounting ... Read Answer >>
  2. What are the advantages of foreign portfolio investment?

    Learn the advantages that businesses can derive from foreign portfolio investment in an increasingly globalized business ... Read Answer >>
  3. I live in the U.S. How can I trade stocks in China and India?

    Foreign markets have always been an object of envy to domestic investors because the indexes in some foreign countries have ... Read Answer >>
  4. How can I trade in foreign futures?

    Discover how an American investor can get started in trading foreign futures, including which regulations and restrictions ... Read Answer >>
  5. Why would an investor want to hold an American Depository Receipt rather than the ...

    Learn about the advantages for investors of using American Depositary Receipts instead of investing directly in the underlying ... Read Answer >>
  6. What nations are actively recruiting FDI (foreign direct investments)?

    Understand the concept of foreign direct investments, and learn which countries most enthusiastically pursue investments ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center