China is Opening the Door to Investment in US Stocks and Funds

January 31, 2008
The China Banking Regulatory Commission (“CBRC”) is expected to soon enter into a memorandum of understanding with the U.S. Securities and Exchange Commission (“SEC”) that will allow Chinese commercial banks that offer wealth management services to invest in equity securities (including investment funds) in the United States under China’s Qualified Domestic Institutional Investor (“QDII”) program. If finalized, the move would further expand the CBRC’s recent liberalization of the QDII program through entry into comparable memoranda of understanding with the UK’s Financial Services Authority in December 2007 and the Monetary Authority of Singapore in January 2008. The move provides U.S. funds and managers with an opportunity to access Chinese investors without having to utilize local intermediaries or partners, or otherwise offer services and investment products into the Chinese markets. In addition, it offers the potential for significantly increased access to Chinese investors and their assets in the event of a future expansion of the QDII program. This article discusses the QDII program and the impacts of its anticipated expansion.