Under the new rules, qualified overseas banks or funds will be allowed to exchange a certain amount of hard currency into local currency and trade in China's yuan-denominated A shares.

Requirements For Different Financial Institutions

For fund management institutions: Having operated fund business for over 5 years with the most recent accounting year's managing assets of not less than US$10 billion;

For insurance companies: Having operated insurance business for over 30 years with paid-in capital of not less than US$1 billion and managing securities assets of not less than US$10 billion in the most recent accounting year;

For securities companies: Having operated securities business for over 30 years with paid-in capital of not less than US$1 billion and managing securities assets of not less than US$10 billion in the most recent accounting year;

For commercial banks: Ranking among the top 100 of the world in the total assets for the most recent accounting year and managing securities assets of not less than US$10 billion.

Approval

The CSRC shall, within 15 working days from the date the full set of application documents are received, determine whether to grant approval or not. Securities Investment Licenses will be issued to those applicants whose applications have been approved whereas written notices will be given to those applicants whose applications have been rejected.

Business Scope

Subject to the approved investment quota, QFII can invest in the following renminbi financial instruments:

1. Shares listed in China's stock exchanges (excluding B shares);

2. Treasuries listed in China's stock exchanges;

3. Convertible bonds and enterprise bonds listed in China's stock exchanges;

4. Other financial instruments as approved by CSRC.

Duration

Foreign investors must leave their money in the market for at least three years.

Limits

1. Shares held by each QFII in one listed company should not exceed 10 percent of total outstanding shares of the company;

2. Total shares held by all QFII in one listed company should not exceed 20 percent of total outstanding shares of the company.

Custodian Banks

QFIIs are required to find a commercial bank to act as a custodian which is responsible for overseeing the investment; and QFIIs' transactions must be conducted through a domestic securities company.