Removal of QFII/RQFII caps to attract long-term investment: official

The lifting of investment quota limit for approved foreign investors is conducive to the long-term development of China's financial market, an official with the country's forex regulator has said.

"The removal of investment caps will attract more long-term investors, promote stability of the yuan exchange rate and help maintain the balance of international payments," said Zhang Xin, deputy head of the State Administration of Foreign Exchange (SAFE), in an exclusive interview with Xinhua.

The SAFE announced last week that it will abolish the investment quota restrictions for the Qualified Foreign Institutional Investors (QFII) and Renminbi Qualified Foreign Institutional Investors (RQFII) to boost financial reforms and opening-up.

As the qualified foreign investors usually have a long-term investment horizon, their increased holdings of Chinese stocks and bonds may gradually change the overall investment style in China's capital market, Zhang said.

In terms of market capitalization, QFII holds some 41 percent of stocks owned by all foreign investors, but the proportion comes down to 23 percent in terms of market turnover, indicating these investors prefer not to make frequent transactions, he said.

The SAFE is working on relative matching regulations to support the removal of investment caps and strengthen supervision to forestall financial risks, Zhang said.

Since the implementation of the QFII system in 2002 and the RQFII system in 2011, more than 400 institutional investors from 31 countries and regions have invested in China's financial market in this way, according to the SAFE.