Chinese QDII: Investors unleashed

Author: | Published: 1 Dec 2006

All eyes are on China, waiting for it to liberalize foreign exchange controls to allow for free capital mobility of its currency. China must allow for the appreciation of the renminbi and free bilateral movement of China's capital account to ease the imbalances within the international financial system and ensure the stability of its domestic economy. It is an issue receiving much attention – something made clear by US Treasury secretary Paulson's visit to China in September 2006.

Chinese regulators have also recognized the need to broaden the channels of overseas investment available to domestic Chinese. With the rapid growth of the Chinese economy, the burgeoning trade surplus and the high rate of domestic savings, China's foreign reserves have grown to a record $1.3 trillion in personal savings.

But it is generally administratively difficult to convert domestic renminbi deposits into foreign currencies. Often, institutions and individuals have to go through...