September 24, 2012 / 11:00 AM / in 6 years

China investment quota granted to foreigners exceeds $30 billion

SHANGHAI (Reuters) - Chinese regulators have cleared the way for overseas investors to buy more than $30 billion worth of stocks and bonds in China, exceeding the previous program limit, as Beijing seeks to attract more foreign portfolio investors.

An investor reads information displayed on an electronic screen at a brokerage house in Shanghai July 30, 2012. REUTERS/Aly Song

As of September 19, 157 foreign institutions had been granted $30.82 billion worth of quotas under the Qualified Foreign Institutional Investor (QFII) scheme, with nearly a third of them approved this year, the State Administration of Foreign Exchange (SAFE) said on Monday.

Regulators have accelerated QFII approval this year. However, the current cap on the program, which was increased to $80 billion from $30 billion earlier in the year, has remained unused until now.

Monday’s announcement comes amid signs that overseas interest in Chinese financial assets have waned against the backdrop of weaker economic growth and slower appreciation of the Chinese yuan.

“The worry is that foreign investors — many of them concerned over health of China’s economy — are not actively applying for quota to invest in the Chinese market,” said an official familiar with the issue, who declined to give his name because he is not authorized to speak to the media.

In an unusual move by the Chinese government, officials from the Shanghai and Shenzhen stock exchanges, accompanied by domestic fund managers, custodian banks and brokerages, embarked on a global tour earlier this month aimed at winning overseas investors for Chinese assets, according to three sources familiar with the plan.

China launched the QFII program in 2003 to allow foreign investors access to the country’s tightly controlled capital markets.

Gerard DeBenedetto, chief executive officer of AZ Investment Management, said that many foreign investors remained keen to buy Chinese stocks and bonds.

“We definitely have investors looking to get exposure to A-shares,” he said.

But he said that products in Hong Kong based on Chinese assets, including synthetic products, were more attractive to foreign investors in many cases, given that many of the foreign funds have lower fee structures.

For a graphic of China's QFII approvals, click:

Reporting by Samuel Shen and Pete Sweeney; Editing by Jeremy Laurence

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