Announcement by the State Administration of Foreign Exchange of the Provisions on the Administration of Foreign Exchange in Domestic Securities Investments of Qualified Foreign Institutional Investors

A QFII shall refer to the chart of the conversion rate of currencies to US dollar on the current month of remittance promulgated by SAFE to compute the remitted investment quota equivalent to dollars in value while remitting non-dollar deposit.

Article 9 The lock-in period for deposit for the QFIIs of such types as pension fund, insurance fund, common fund, charity fund, donation fund and government and currency administration and the open-ended Chinese fund established by QFIIs shall be 3 months; and that of deposit for other QFIIs 1 year.

The lock-in period of deposit for a QFII shall be computed as of the date when full deposit is remitted; for that of deposit that fails to be fully remitted in the prescribed time, it shall be computed 6 months as of the date when investment quota is approved.

The aforesaid “open-ended Chinese fund” refers to the open securities investment fund that is initiated and set up overseas in the form of public offering and at least more than 70% of which is invested in China. A QFII should submit the original copy of the fund prospectuses and Chinese translation of its core content to the SAFE for filing.

The above-mentioned “lock-in period of deposit” refers to the period limit beyond which a QFII shall not remit the principal of investment to foreign countries.

Chapter III Administration of the Account

Article 10 A QFII shall, in accordance with the investment quota approved by the SAFE and the reply document of opening account, open a foreign exchange account and a corresponding special RMB account for self-owned fund where a custodian is domiciled or the client fund for which the custodian provides service of assets administration separately.

Where a QFII establishes open-ended Chinese fund, a foreign exchange account and a corresponding special RMB account should be separately opened for each open-ended Chinese fund.

A custodian should go through a filing in the foreign exchange bureau where the custodian is domiciled within 5 working days upon the opening of the QFII foreign exchange account and the special RMB account, submit the official custody agreement to the SAFE and receive the Foreign Exchange Registration for the QFII.

Article 11 The scope of the revenues of a QFII foreign exchange account covers: principal and interest income remitted by the QFII from outside China, the fund transferred from the special RMB account, and other incomes verified by the SAFE; and the scope of the expenditures of a QFII foreign exchange account covers: the fund transferred through settlement of the special RMB account of a QFII, fund expatriated outside China through the original route and other expenditures verified by the SAFE.

The incomes of the special RMB account of a QFII covers: fund remitted through settlement of a QFII foreign exchange account, price of selling securities, cash dividends, interest incomes and other incomes verified by the SAFE; the expenditures thereof covers: the price paid (including stamp tax and commissions) for purchase of prescribed securities products, payment of tax, custody fee, audit fee, management expenses and other relevant expenses, fund remitted into the QFII foreign exchange account for purchasing foreign exchange and other expenditures verified by the SAFE.

Funds in the QFII foreign exchange account and the special RMB account shall merely serve as domestic securities investment in China.

Article 12 The QFII’s self-owned fund account, the client fund account and its open-ended Chinese fund account shall not conduct the transfer of fund from each other, and nor shall open-ended Chinese fund accounts of the same QFII.

Article 13 Deposit interest rate of a QFII foreign exchange account and a special RMB account is subject to the relevant provisions of the People’s Bank of China.

Article 14 A QFII shall liquidate assets and close down the foreign exchange account and the special RMB account where its custodian is domiciled within 1 month and its corresponding investment quota shall be simultaneously invalid in the following situations:

(1)    CSRC has confiscated its securities investment operation license;

(2)    A QFII remits deposits equivalent in value of less than USD20m within 6 months upon the approval of the first investment quota;

(3)    The domestic sum of remaining deposit equivalent in value of less than USD20m for a QFII’s withdrawal of investment;

(4)    The SAFE revokes the original investment quota of a QFII according to the Provisions herein; and

(5)    Other situations as prescribed by the SAFE.

A custodian should conduct a filing to the foreign exchange bureau where it is domiciled within 5 working days upon the closing of a QFII foreign exchange account and a special RMB account and return the Foreign Exchange Registration to the SAFE.