**_b. Significant steps have been taken to open stock market_** . In late 2001, the China Securities Regulatory Commission (CSRC) issued regulations on the public listing of foreign-invested enterprises. In December 2002, China launched the Qualified Foreign Institutional Investors **(QFII)** scheme, enabling eligible foreign investors invest in “A” shares (which were previously only open to domestic investors) under certain limitations. As of July 2004, 15 QFIIs had received a cumulative quota of USD$1.875 billion dollars. These funds are transferred and converted into domestic currency, deposited in special accounts and invested in equities and bonds. (See table 2 for a series of important events in China’s QFII development.)

**Table 2: Important Events Related to the Qualified Foreign Institutional Investors (QFII)**

|Nov. 7, 2003|CSRC and PBC jointly issued Administration Rules on Qualified Foreign Institutional<br>Investors (QFII)’s Security Investment, which were implemented from Dec. 1.|
|---|---|
|Nov. 28, 2003|State Administration of Foreign Exchange(SAFE) issued Foreign Exchanges<br>Administration Rules on QFII’s Security Investment, effective from Dec. 1.|
|Dec. 1, 2003|QFII Scheme was officially launched. The scheme stipulates that in order to be eligible<br>for QFII a foreign investing institution must have at least 10 billion dollars in assets and<br>foreign banks must be in the top-100 globally. And their investment in A shares is<br>limited to only 10% of any one company. There are restrictions for repatriation:<br>investments in closed-end funds are not allow to repatriate for three years, other funds<br>must wait a year and money can only be repatriated in small trenches.|
|Mid-Jan., 2003|<br>PBC announced that 6 domestic banks (ICBC, ABC, BOC, CCB, Bank of<br>Communications, China Merchants Bank) and 3 foreign banks’ branches in Shanghai<br>(Standard Charted Bank, HSBC, Citi Bank) have been allowed to open custodial services<br>for domestic securities investment by QFIIs.|
|May 26, 2003|<br>CSRC awarded QFII license to UBS Warburg and Nomura Securities. They became the<br>first foreign institutions to receive approval to invest directly in RMB-denominated “A”<br>shares and government bonds.|
|May 30, 2003|<br>SAFE authorized investment quotas of USD$300 million and USD$50 million<br>respectively to UBS Warburg and Nomura Securities.|
|Jun. 24, 2003|<br>SAFE authorized UBS Warburg to open an special QFII RMB account in its custodial<br>service provider—Citi Bank’s Shanghai Branch This is the first QFII RMB account|
|Jul. 9, 2003|. .<br>Through Shenyin & Wanguo Securities, UBS Warburg bought stocks of Baoshan Iron &<br>Steel, Shanghai Port Container, SinoTrans Development, and ZTE, completed the first<br>QFII transaction.|
|Oct. 23, 2003|<br>Deutsche Bank was allowed to open custodial service for domestic securities investment<br>by QFIIs. The total number of such banks reached 12.|
|Dec. 12, 2003|CSRC awarded QFII license to Standard Charted Bank(Hong Kong), Nikko Cordial<br>Securities, brought the total QFII number to 12, total investment amount USD$1.7<br>billion.|
|Mar. 30, 2004|Nikko Cordial Securities made their first investment in China’s capital market. By<br>setting up the first foreign fund to invest in China’s Government bond market, it became<br>the first foreign institution enter the QFII scheme in the form of fund. It also represented<br>Chinese Government’s RMB-denominated bond entered the international investment<br>stage.|
|May 9, 2004|<br>CSRC awarded QFII license to Merill Lynch.|
|<br>May 12, 2004|<br>CSRC awarded QFII licenses to HSBC Co. Ltd, and Daiwa Securities SMBC Co. Ltd.<br>Till then, a total of 15 QFIIs have entered China’s security market.|
|Jul. 12, 2004|<br>SAFE authorized Daiwa Securities SMBC Co. Ltd a investment quota of USD$50<br>million. Till then 15 foreign investment institutions have received a cumulative<br>investmentquota of USD$1.875 billion.|

Source: Securities Market Weekly July 2004.

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