China has broadened approvals for its Qualified Foreign Institutional Investor program since October, reversing a previous approval freeze that held investors at bay from May to October; according to official data that were released Thursday.
Reuters reported that combined quotas granted under the QFII program in 2011 totaled $1.92 billion, the lowest since 2007, partly due to that approval freeze. However, since October when the freeze was lifted, Beijing has allowed approval of nearly $1 billion in quotas for foreign institutions to invest in the country’s capital markets.
Analysts believe that the change in policy was the result of capital outflows as some investors grew more concerned about the state of the markets and withdrew funds. That led to a weakening of the yuan against the dollar in the onshore market.
Howhow Zhang, head of research at Shanghai-based consultancy Z-Ben Advisors, was quoted saying, “Typically when the yuan faces pressure to appreciate, regulators slow or suspend quota approvals. I think now, because there is a capital outflow, approvals are being accelerated.”