China further liberalizes currency controls


On 7 May 2020, the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) jointly issued the Administrative Measures on Funds Used by Foreign Institutional Investors for Domestic Securities and Futures Investment (PBOC and SAFE Announcement [2020] No. 2), which will come into effect on 6 June 2020.

The issuance of the administrative measures echoes an earlier public announcement made by the SAFE, in September 2019, on the proposed repeal of inbound investment quotas applicable to qualified foreign institutional investors (QFIIs) and renminbi-qualified foreign institutional investors (RQFIIs – together with QFIIs, the “FIIs”) with an aim to liberalize the currency control policies over FIIs.

Under the administrative measures, there are two key developments (set out in sections 1 and 2 below) that demonstrate the joint efforts made by the PBOC and SAFE to streamline and simplify the formalities in relation to investments into the PRC securities and futures market by foreign institutional investors.

No more investment quota

Prior to issuance of the administrative measures, the securities and futures investments by FIIs into China were subject to an inbound investment quota. One quota would be approved by the SAFE for each FII, based on the volume of assets under the management of each particular FII. The investment quota is the maximum amount of capital an FII may inject into China for domestic securities and futures investments. Such an investment quota is now repealed by the administrative measures, and FIIs may determine inbound investment amounts based on their actual business needs.

Unified approach

QFIIs and RQFIIs have previously been subject to two separate currency control rules, before the administrative measures were in place. QFIIs were required to invest only in foreign currency, and RQFIIs only in renminbi. Now, an FII may elect to inject foreign currency or renminbi, or both, for its inbound investments at its own discretion, and open accounts in China according to the denomination currency of its investment.

Other developments

(1) Simplified formalities for fund repatriation funds earned by FIIs in China can now be remitted out of China in a more timely manner pursuant to the administrative measures.

  • The audit report of investment earnings issued by a PRC certified public accountant is no longer required for verification by banks when FIIs repatriate funds.
  • An FII can now provide a letter of undertaking issued in its own name (as opposed to a tax payment certificate issued by tax authority) for verification by banks for fund repatriation.

(2) Unlimited number of local custodians. In the past, each QFII has been allowed to appoint only one local custodian for the custody of its investment assets, while each RQFII may appoint up to three local custodians. However, in practice, some international (especially large-scale) institutional investors tend to segregate their investment assets for custody by different local custodians when they undertake businesses outside China, and such restrictions on the number of local custodians made some FIIs adapt their business model specifically for the PRC market.

Under the administrative measures, there is no longer any limitation on the number of local custodians that an FII (be it a QFII or RQFII) may appoint. This new development will enable FIIs to align their business models in China more with their global practice.

(3) Simplified account arrangement. If an FII only desires to open one renminbi settlement account for its investments in China, it may directly open such an account, while in the past, another renminbi basic deposit account was required to be opened before an FII could open its renminbi settlement account.


In recent years, we have witnessed the gradual liberalization in the FII regime by PRC regulators in order to attract more investment into China. The issuance of the administrative measures is another endeavour made for such liberalization, by encouraging more inbound fund flow and enhancing transaction efficiency.

The administrative measures will attract more interest from foreign institutional investors in the PRC securities and futures market, and contribute to the transition of the A-share investment channel from the Stock Connect regime into the FII regime, and hopefully, to a more vibrant PRC capital market with deeper involvement from foreign institutional investors.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at