China has increased the investment quota for Qualified Domestic Institutional Investors (QDII) by $6.8 billion, providing some relief to the limited allocation as rising interest in foreign assets and the desire for diversification boost investor demand.
The latest quota, approved by the State Administration of Foreign Exchange on August 28, raises the total market capacity to $183 billion. When combined with the additional quotas allocated earlier in March, this year’s total QDII investment quotas have surged to $12.14 billion, compared to just $3.08 billion for the entire previous year, highlighting a rapid acceleration in quota distribution.
Overall, these new allocations were distributed among 89 institutions, including major banks, securities firms, fund management companies, and insurers. Trust companies were the only group that did not receive additional quotas. Most individual institutional quotas ranged between $20 million and $100 million.
Securities firms and fund managers are the primary beneficiaries of this round of expansion, reinforcing their dominant industry positions. Fifty-three such institutions received a combined $3.72 billion, making up 54.4% of the new total. As a result, the cumulative approved quota for this sector has surpassed $101 billion, crossing the $100 billion mark for the first time and representing 55% of the total market capacity.
Quota allocations for other segments were also clearly delineated: banks and insurers received new quotas of $1.76 billion and $1.36 billion, respectively, bringing their total approved quotas to $31 billion and $42 billion, accounting for 17% and 23% of the overall market. Trust companies hold a combined quota of $9 billion, less than 5% of the total, indicating an increasing disparity among institutional investors.
The quota expansion also brought an increase in the number of institutions participating in the program. For the first time, three entities—Xinyuan Asset Management, East West Bank (China), and China CITIC Bank International—were granted QDII quotas, each receiving $100 million.
The number of domestic mutual fund companies with QDII quotas has grown to 57, with total approved allocations reaching $83.59 billion. Among these, nine firms have approved quotas exceeding $2.5 billion each. Their combined quota of $41.8 billion accounts for over half of the sector’s total, reflecting significant concentration among leading players.
E Fund Management holds the largest quota among mutual funds. Since its initial approval of $1 billion in October 2009, the company has received 20 increases, bringing its total to $7.96 billion—making it the biggest single institution in the market. Ping An Insurance ranks second with a quota of $7.86 billion.
In recent years, as the appeal of overseas assets has grown and global diversification has become more desirable, QDII funds have become increasingly attractive. Data indicates that the total assets under management for QDII funds exceeded CNY 1 trillion (about $149 billion) for the first time in January, reaching CNY 1.07 trillion by the end of July.
However, despite the growing demand, a gap remains between investor interest and available quotas, leading to restrictions on purchases. For some popular funds, daily subscription limits have been reduced to as little as CNY 10 ($1.50), reflecting intense control measures.
As of August 28, there are 333 QDII products on the market, excluding those still within lock-up periods or not yet launched. Of these, 34 are fully closed to new investors, and 124 impose strict purchase restrictions—these two groups make up nearly half of all available products.
Industry experts warn that as quotas ease, investors should be cautious about the potential for premiums on exchange-traded QDII funds to revert toward their net asset values. If premiums decrease, investors who bought funds at high premiums may face losses even if the underlying assets remain stable, according to a senior official from a major mutual fund firm.
Lifting quotas mainly addresses the question of “whether investors can buy,” but it does not eliminate inherent risks like market volatility in overseas markets. Industry insiders advise investors to allocate assets thoughtfully, aligning with their investment goals and avoiding impulsive buying solely driven by market hype.