萬國法律事務所

Taiwan’s Financial Supervisory Commission (FSC) under the Executive Yuan announced recently that in order to qualify as a Qualified Foreign Institutional Investor (QFII) in the People’s Republic of China (PRC), a Taiwanese company doing business in the financial industry simply has to apply to the China Securities Regulatory Commission (CSRC), and then within 5 business days, request Taiwan’s Securities Investment Trust & Consulting Association (SITCA) to forward the application to the FSC for filing. This regulation will be effective immediately and, in the future, a Taiwanese company doing business in the financial industry and investing in PRC A shares will be required to make monthly reports to the FSC. A rush of applications by the Taiwan securities investment trusts is expected.

Under current PRC regulations, the threshold in asset portfolio (including mutual funds, discretionary funds and private equity funds) for making a company eligible to apply for QFII is USD 5 billion, equivalent to approximately NTD 160 billion. Presently, approximately eight investment trusts would qualify, including Yuanta, Entie, Prudential, Cathay, Fubon, Fuh Hwa, Capital and Polaris. In addition, more than 70 foreign investors are in line for PRC QFII quota to invest in PRC A shares. It will however take at least six to nine months to obtain the QFII quota. Together with the time necessary for applications to the FSC and the Central Bank, funds of A shares cannot appear on the market until at least one year from now.

Although it is rumored that the PRC authorities have been studying the possibility of lowering the QFII application threshold for Taiwanese funds, such lowering is not likely before the Economic Cooperation Framework Agreement is signed.