CSRC: Clarifies the applicable rules for short-term trading by foreign public funds and supports domestic institutions in providing investment advisory services to foreign investors.

CSRC: Clarifies the applicable rules for short-term trading by foreign public funds and supports domestic institutions in providing investment advisory services to foreign investors.

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On the 27th, the China Securities Regulatory Commission released the "Optimization Plan for the Qualified Foreign Investor System".

It mentions striving to take about two years to promote the implementation of reform measures to optimize the qualified foreign investor system and mechanisms, enhance the system's attractiveness to medium- and long-term overseas funds, and establish a new pattern of coordinated and complementary onshore and offshore channels, balanced development of allocative and trading funds, and positive interactions between domestic and overseas securities, fund, and futures institutions in an open environment.

Next, the CSRC will promote the rapid implementation of various opening-up and optimization measures proposed in the "Plan," and on this basis further deepen research on the qualified foreign investor system, continuously enriching and enhancing reform measures to increase the attractiveness of opening-up policies.

Clarifying Applicable Rules for Short-Term Trading by Foreign Public Funds

The document mentions clarifying the applicable rules for short-term trading by foreign public funds. Foreign public funds will be given the same treatment as domestic public funds in calculating the proportion of short-term trading holdings by product account, facilitating investments by large overseas asset management institutions.

Allowing Use of ETF Options for Risk Management

It states that ETF options are allowed for risk management. It will actively leverage the advantages of the qualified foreign investor channel's broad product coverage, which supports risk management and asset allocation needs, and steadily advance QFIs' investment in ETF options to meet the reasonable hedging needs of foreign investors.

Implementing a "Green Channel" for Allocative Foreign Capital such as Sovereign Funds

A green channel and simplified procedures will be applied for allocative foreign investors such as sovereign funds, international organizations, pension funds, and charitable funds, making it easier for more foreign investors to invest in China. At the same time, further optimizing, simplifying, and integrating the procedures and material requirements for QFI qualification approval and account opening will help shorten the process and time for foreign capital to enter the market, lower operating costs, and enhance the operational convenience of the qualified foreign investor system.

Allowing Domestic Licensed Institutions to Provide Investment Advisory Services to Foreign Capital

The document mentions allowing domestic professional licensed institutions to provide investment advisory services to foreign investors. Rules for securities and fund investment advisory business will be introduced more quickly to support domestic professional licensed institutions in providing securities investment advisory services to qualified foreign investors. The feasibility of supporting domestic institutions to provide management-type investment advisory services to foreign capital will be further studied.

Optimization Plan for the Qualified Foreign Investor System

The Party's 20th Third Plenary Session clearly proposed optimizing the qualified foreign investor system, steadily expanding institutional opening-up, and building a transparent, stable, and predictable institutional environment. Since its launch in 2002, the qualified foreign investor system—one of the earliest opening-up measures in China’s capital market—has remained generally stable in operation. It serves as a comprehensive asset allocation channel for foreign investors to invest in China and has played a positive role in expanding the opening-up of the capital market. In order to further enhance the appeal of the qualified foreign investor system, attract medium- and long-term foreign capital, and steadily expand high-level institutional opening-up in the capital market, this plan is formulated.

I. General Requirements — Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly implement the spirit of the 20th Party Congress Third and Fourth Plenary Sessions, and the Central Financial Work Conference, adhere to coordinating financial opening-up and security, and pursue market-oriented, law-based, and international directions. Focus on optimizing access management and facilitating investment operations, striving to implement reform measures to optimize the qualified foreign investor system within about two years, enhancing the system's attractiveness to medium- and long-term overseas funds, and creating a new pattern of coordinated and complementary onshore and offshore channels, balanced development of allocative and trading funds, and healthy interaction between domestic and overseas securities, fund, and futures institutions in an open environment.

II. Optimizing Access Management

(1) Optimizing the pre-investment access process. Implement the "efficiently accomplish one thing" concept. By streamlining and integrating materials and processes, promote efficient processing of QFI qualification approvals, license issuance, foreign exchange registration, basic account opening, and securities/futures account opening.

(2) Implementing categorized management for access. Provide green channels and simplified procedures for sovereign funds, international organizations, pension funds, charitable funds, and other allocative foreign investors to facilitate more foreign investors investing in China.

III. Optimizing Trading and Settlement, Facilitating Investment Operations

(3) Improving the efficiency of fund remittance and verification. Under existing laws and regulations, guide custodians and securities companies to improve service quality and operational efficiency, shorten the time for fund transfer, credit, and confirmation processes, and further improve intermediaries' verification efficiency for funds received within a trading day.

(4) Improving securities account operation efficiency. Better meet asset management institutions’ needs to optimize trade execution and treat product investors fairly. Provide technical support for the one-off transfer and consolidation of funds from the "QFI—client funds" securities account for foreign investors, while strengthening requirements on transparent reporting for such accounts. Actively study and respond to reasonable requests such as moderate expansion of scenarios for securities transfers.

(5) Increasing transparency of regulatory requirements for investment operations. Revise the "Implementation Rules for Relevant Issues" to improve account operation efficiency and optimize management approaches for cross-border investment models, enhancing transparency and predictability of policy rules.

IV. Expanding Investment Scope, Optimizing Risk Management

(6) Allow the use of ETF options for risk management. Actively leverage the broad product coverage advantage of the QFI channel in supporting risk management and asset allocation needs; steadily promote QFI investment in ETF options to meet reasonable hedging needs of foreign investors.

(7) Allow participation in more varieties of commodity futures and options trading. Continue to gradually open more varieties of commodity futures and options for foreign investors, meeting the needs for large asset allocation under multi-asset strategies and the hedging of spot price risks by foreign commercial and industrial enterprises.

V. Clarifying Policy Expectations

(8) Clarify the applicable rules for short-term trading by foreign public funds. Give foreign public funds the same treatment as domestic public funds in calculating short-term trading position ratios by product account, facilitating investment by large overseas asset management institutions.

(9) Strengthen supervision of program trading. Based on unified principles for both foreign and domestic capital, implement program trading reporting and regulatory requirements, stabilize policy expectations, and facilitate compliance arrangements for investors.

(10) Optimize management methods for cross-border investment models. Optimize the management of return swap and other businesses under the QFI channel, clarify and improve rules for business access management, ongoing supervision, and penalty arrangements for violations.

VI. Enriching Service Support

(11) Allow domestic professional licensed institutions to provide investment advisory services to foreign capital. Accelerate the introduction of business rules for securities and fund investment advisory services, support domestic professional licensed institutions in providing such services to QFIs, and research the feasible path for domestic institutions to provide management-type investment advisory services to foreign investors.

Source: CSRC

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