Overview of the QDII program in China

Written by Helen Lin || April 05 2012

What is QDII

The QDII (Qualified Domestic Institutional Investor) program was first launched in 2004 initially for insurance companies to invest their foreign exchange funds in the Chinese companies traded in overseas markets, with PingAn insurance company being the first institutional investor to receive a QDII quota of US$8.89 billion. Since then, the program has expanded and now allows institutional investors, including commercial banks, security companies, fund companies, insurance companies and trust funds to raise funds in mainland China and invest in offshore capital markets under the control of China’s foreign exchange regulator.

All the participants in the QDII program are required to first obtain a QDII license from the relevant regulatory agency (either China Securities, Banking or Insurance Regulatory Commission) and then a quota, which is granted by the State Administration of Foreign Exchanges (SAFE) as the first step of their oversea investment. After insurance companies, commercial banks and fund companies were allowed to obtain QDII licenses in April 2006. The first bank to receive a QDII quota was the Bank of China (BOC), with US$1 billion of quota, which was granted on 10 July 2006.In September 2006, HuaAn Fund Management Co., Ltd. was approved to be the first fund company to get a QDII quota of US$500 million.

As of the end of February 2012, 96 QDII licenses have been issued to 26 commercial banks, 31 fund companies, 8 security companies, 26 insurance companies and 5 trust funds, with US$75.25 billion of investment quota allocated.

Restrictions on investment scope

Under the QDII program, China Banking Regulatory Commission (CBRC), China Security Regulatory Commission (CSRC), and China Insurance Regulatory Commission (CIRC) set up limitation of investment scopes on each type of QDII entity respectively.


Type of QDII entity Investment scope
Commercial banks Can invest in overseas fixed-income products (e.g. bonds, notes), structured and derivative products and certain equity products (e.g. stocks, public funds), but they cannot invest in commodity derivatives, hedge funds and securities below ‘BBB’ level.
Security companies & fund managers Restricted to invest in overseas stocks, bonds, depository receipt, real estate investment trust, public funds, structured products and other financial derivatives.
Insurance companies Restricted to invest their foreign exchange funds in overseas money market products(e.g. bank bills ,negotiable certificates of deposit), fixed income products, depository receipt, and certain equity products (e.g. stocks, stock funds)
Trust companies Restricted to invest in overseas money market products (e.g. bank deposits, depository receipt), bonds and financial derivative products permitted by CBRC.


QDII quota allocation

After the approval of Bank of China and the HuaAn fund as trial QDIIs in 2006, the QDII scheme has expanded to involve more institutional investors since 2007. As of the end of 2007, US$64.5 billion of QDII investment quota has been approved by SAFE. However, due to the global financial turmoil, the QDII scheme was suspended in the second half year of 2008 and no quota was approved until the program was restarted in May 2009.

(Source: http://www.safe.gov.cn/)

By the end of March 2012, the total quota approved by the SAFE has reached US$75.25 billion, surpassing the total figure (US$74.95 billion) of last year. With the further global recovery of the global financial turmoil and the further development of emerging markets, it clearly remains optimistic that the outbound investment of QDII this year will reach a new high level.