China will hike quota for investors buying overseas assets
Regulators will lift a cap on flows under the qualified domestic institutional investors (QDII) scheme, said Zhu Hexin, head of China's top currency regulator, at the Lujiazui Forum in Shanghai on Wednesday (Jun 18). The quota, which limits investors' ability to load up on assets such as Treasuries and overseas equities, has not been increased since May 2024.
The move follows a period of relative calm in the value of the yuan against the US dollar, fuelled by growing questions about the greenback's place in the global trading system. That has given Beijing the breathing room to ease its tight control over capital flows – and instead shift focus back to a long-term ambition of spreading the use of the yuan overseas.
'Expanding QDII may be a step in the broader process of renminbi internationalisation and opening up,' said Lynn Song, chief economist for Greater China at ING Groep. 'There should be solid demand for this, especially given the interest-rate differential between China and many other markets.'
China is also planning to explore and pilot yuan futures trading and establish a digital yuan operation centre, Pan Gongsheng, head of the central bank, said on Wednesday.
The US dollar has tumbled almost 8 per cent against a basket of currencies this year, hit hard by a 'Sell America' trade and fears about US President Donald Trump's unpredictable trade policies. China's central bank has largely held its currency steady against the greenback, spreading pressure to the yuan's value against currencies such as the euro and the Korean won.
The so-called QDII programme allows funds who meet certain conditions to invest in foreign securities with a prescribed quota. Beijing tightly controls the programme to manage capital outflows and ease pressure on the yuan. The current quota stands at US$167.79 billion.
The onshore yuan was trading at around 7.186 against the US dollar on Wednesday, slightly higher on the day. BLOOMBERG
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