Qualified Foreign Institutional Investor - Explained
What is a Qualified Foreign Institutional Investor?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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What is a Qualified Foreign Institutional Investor?
A Qualified Foreign Institutional Investor (QFII) is a non-Chinese individual or organization granted permission by the Government of China to trade on stock exchanges in Shanghai and Shenzhen.
What Does a Qualified Foreign Institutional Investor Do?
Prior to the creation of the Qualified Foreign Institutional Investor status in 2002, foreign individuals were not allowed to buy or sell securities on a Chinese exchange. China is still a controlled economy, but this exemption is a major step toward an open market. The Chinese State Administration of Foreign Exchange grants permission and sets quotas for the value of securities that can be purchased or traded on the exchange. The requirements for approval to trade on the exchange vary depending on the type of trader. Allowed securities include those approved by Chinas Securities Regulatory Commission, such as listed stocks of domestic companies (A Shares), treasury bonds, corporate debentures, and convertible bonds. The program also allows investors to make hedge their investments to protect against foreign exchange risks.