FX.co ★ China Raises Limit on Overseas Asset Buys

The State Administration of Foreign Exchange in China has raised the foreign-exchange quota for Qualified Domestic Institutional Investors (QDII) to USD 170.9 billion by the end of June, up from USD 167.8 billion. This represents the first increase in the allocation for approved investors towards overseas assets since May 2024, as authorities aim to relax controls on capital outflows. The adjustment aligns with a softer US dollar and diminished demand for overseas investments such as US stocks, which have contributed to reducing pressure on the yuan. Through the QDII initiative, authorized Chinese institutions are permitted to invest in international securities, bonds, and commodities within specified constraints. The past two years have seen a rise in interest in foreign assets, driven by a lackluster domestic equity market, leading to pricing distortions in ETFs due to demand exceeding the available quota. The recent quota expansion includes an allocation of USD 2.1 billion for securities firms and fund houses, USD 660 million for banks, and USD 300 million for insurers.