2 days ago
Japan official urges China to expand foreign investment quota
A Japanese government official called on China to expand a program allowing certain mainland investors to put more money abroad, citing "strong enthusiasm' for Japanese stocks.
"I'd like to request that China continue to move forward with its financial opening to the rest of the world,' Satoru Shibata, an adviser to the Financial Services Agency on China issues, said at a forum in Tokyo Friday, according to prepared remarks.
Local demand for Japanese shares means that "a further expansion of the quota is necessary,' he said, adding that the views are his own.
Shibata was referring to a Chinese measure known as the Qualified Domestic Institutional Investors program, which allows eligible firms to buy foreign assets within prescribed limits. Japanese officials made a similar call in March when they held a high-level economic dialogue in Tokyo with their Chinese counterparts.
"There is enormous potential for growth in Japan-China financial cooperation,' Shibata said at the forum held by China International Capital, noting limited securities investments between the two nations relative to between the U.S. and Japan. "That presents significant business opportunities waiting to be tapped.'
China has been easing its strict controls over capital outflows in recent years. The State Administration of Foreign Exchange raised the combined QDII quota last month by roughly $3 billion to $170.9 billion, the first increase in a little more than a year.
Still, Bloomberg Intelligence analysts called the amount "insufficient' to meet demand from Chinese people looking abroad to diversify their portfolios.
Chinese investors' interest in Japanese stocks came into sharp focus early last year as local equities slumped. Their frenzied purchase of onshore exchange-traded funds tracking Japanese shares prompted trading halts in a number of products and warnings from issuers over their premiums. Fund houses had to allocate more of their QDII quota from other products to Japan-linked ETFs to meet the demand, local media reported at the time.
The latest quota change means managers of five Chinese ETFs tracking Japanese equities can tap as much as $220 million in combined investment limits should demand surge again.
While Shibata welcomed the increase, it was "somewhat small in scale considering the present Chinese interest in Japanese equities,' he said.
Chinese investors' appetite for overseas assets typically increases when onshore markets falter, though they are barred from using their annual foreign exchange quota of $50,000 for direct offshore investments including securities. The few official channels include the fund products issued under the QDII program, as well as stock trading links with Hong Kong, though they are far from enough to meet the growing demand for global diversification.
Mainland investors had also sought to circumvent the nation's capital controls to trade offshore securities, until Chinese regulators moved to clamp down on the illicit practice during 2021-2023.
The FSA is looking to hold a Japan-China Capital Market Forum at an early date, Shibata said. The platform for cooperation between the nations' securities regulators and relevant industry groups last took place three years ago.
