China plans a nearly three-fold jump in quotas for the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme, which permits qualified investors to channel offshore yuan funds into mainland stock and bond markets.
The securities regulator also said that the quota for the Qualified Foreign Institutional Investor (QFII) scheme -- the original, dollar-denominated program that allows institutional investors to buy stakes in Chinese-listed stocks or bonds -- could be lifted if its current, 80 billion yuan ($12.81 billion) limit is reached.
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The RQFII quota will be raised by 200 billion yuan from the current 70 billion yuan, Guo Shuqing, the head of the China Securities Regulatory Commission, told reporters on Sunday.
The increase follows a request by the Hong Kong authorities, Guo said. Most offshore yuan funds are raised in Hong Kong.
"Last week, before the 18th Party Congress started, three main Hong Kong government officials in charge of financial issues raised the issue. 'Can't you expand RQFII again? 70 billion is too small. Can't you raise it by 200 billion?'"
Guo said the People's Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) have already agreed to the increase and are preparing detailed rules, which should be released soon.
The RQFII program was set up to allow foreign investors to use offshore yuan - which Hong Kong banks have accumulated mainly through yuan-denominated trade settlement - to buy mainland securities.
Regarding the QFII program, Guo said it could also be expanded once the current quota is exhausted.
"We've already reached agreement with the PBOC and SAFE. If the $80 billion gets used up, we will definitely expand it," Guo said.
CSRC sets an overall quota for the QFII program and approves foreign institutions as QFIIs, while SAFE grants quotas to individual institutions.
SAFE has so far granted about $30 billion yuan, meaning that about $50 billion in additional quotas could still be granted under the existing quota.
Guo also said that certain individual QFIIs will see their quotas raised. QFII quotas are currently capped at $1 billion per institution.
"We'll look at individual institutions on a differentiated basis. For very big institutional investors - in the past we allowed them to invest at most $1 billion. Now we'll expand the limit to $2 billion, $3 billion, even $5 billion."
The government of Qatar has already applied for a $5 billion quota, official media reported in June.
(Additional reporting by Xiaoyi Shao; writing by Lucy Hornby; Editing by Nick Macfie)