China Capital Market Opening-Up – CSRC Optimizes The QFI Scheme.
On October 27, 2025, the China Securities Regulatory Commission (CSRC) issued the Work Plan for Optimizing the Qualified Foreign Investor Scheme (Work Plan). It proposes 11 measures to enhance the attractiveness of the Qualified Foreign Investor (QFI) scheme and expand the opening-up of China’s capital markets.
I. Optimize Market Access Management
1. Streamline pre-investment onboarding processes. The aim is to simplify documentation requirements and integrate and streamline various processes to improve the efficient handling of QFI qualification approvals and account opening. This includes qualification review, license issuance, foreign exchange registration, basic account opening and securities and futures account opening.
The CSRC released the Service Guide for the “One Thing” Process for QFI Qualification Approval and Account Opening on the same day.
2. Implement categorized access management. A “green channel” and simplified procedures will be implemented for the access approval of allocation-oriented foreign investors such as sovereign funds, international organizations, pension funds and endowment funds.
We believe that the current QFI qualification requirements and procedures are already quite streamlined. Following the implementation of these measures, the application process for allocation-oriented foreign institutions will become even more straightforward.
According to the CSRC’s official website, these two measures took effect alongside the announcement of the Work Plan on October 27.
II. Optimize Trading Settlement and Facilitate Investment Operations
3. Improve the efficiency of fund remittance and verification. Under the existing legal and regulatory framework, this will guide custodians and securities brokers to optimize service quality and operational efficiency, reduce the time for processes such as fund remittance, crediting and confirmation, and further enhance the efficiency of intermediary institutions for verifying funds received intraday.
4. Improve the operational efficiency of securities accounts. To meet foreign asset management institutions’ demands to optimize trade execution and to treat product investors fairly, provide technical support such as one-time block transfers using the “Qualified Foreign Investor – Client Fund” securities accounts, while strengthening the see-through reporting requirements for such accounts. Respond to reasonable comments from foreign investors, such as appropriately expanding the permissible scenarios for securities non-trade transfers.
5. Enhance the transparency of the regulatory requirements for investment operations. There is a proposal to revise the Provisions on Issues Concerning the Implementation of the Measures for the Administration of Domestic Securities and Futures Investment by QFIIs and RQFIIs and implement measures to improve account operational efficiency. This is to optimize the management of cross-border investment models and enhance the transparency and predictability of the policies and rules.
III. Expand Investment Scope and Optimize Risk Management
6. Allow the use of ETF options for risk management. This gives full play to the advantages of QFI channels, and mainly refers to QFI channel’s wider product coverage, which is conducive to supporting risk management and asset allocation demands. It also facilitates QFIs’ investments in ETF options in a steady way so as to meet QFIs’ hedging needs.
Our Observations
The CSRC stated that the QFI channel has the “advantage of wider product coverage, which is conducive to supporting risk management and asset allocation demands”. We understand that this is in comparison to the Stock Connect. In the long run, QFIs’ access to a wider range of risk hedging tools will be an advantage, compared to Stock Connect.
7. Allow participation in more commodity futures and options products. Open up more commodity futures and options to meet the needs of foreign investors for asset allocation under multi-asset strategies, as well as the needs of foreign physical commodity trading firms to hedge physical commodity price risks.
Our Observations
Currently, there only around 40 foreign physical commodity trading firms that have obtained QFI qualification. However, with the further opening of China’s commodity futures market and the convenience of trading commodity futures via QFI channels, we anticipate that more foreign physical commodity trading firms will apply for QFI qualification.
IV. Clarify Policy Expectations
8. Clarify the application of short-swing trading rules to foreign public funds. Grant foreign public funds fair treatment as domestic public funds in calculating shareholding ratios for short-swing trading purposes on a product account basis, facilitating investments by large international asset management institutions.
Our Observations
Article 44 of the Securities Law (amended in 2019) (Securities Law) stipulates that if a shareholder holding 5% or more of the shares of a listed company or a NEEQ-listed company or the company’s director(s), supervisor(s), or senior officer(s) sells their company shares or other equity-type securities within six months after purchasing such shares or securities, or they purchase company shares or other equity-type securities within six months after selling such shares or securities, the gains generated (if any) shall be returned to the company (Short-Swing Profit Rules).
On July 21, 2023, the CSRC released Certain Provisions on Improving the Regulation of Trading Related to Short-Swing Profit Rules (Consultation Paper), proposing that qualified foreign public funds are allowed to calculate securities holdings on a product basis through application.
We expect the above rules to be issued in the near future. Foreign public funds may calculate securities holdings on a product basis after the rules are promulgated.
9. Strengthen the regulation of program trading. Adhering to the principle of fair treatment for domestic and overseas investors, implement program trading reporting and regulatory requirements, stabilize system expectations and facilitate investors’ compliance arrangements.
Our Observations
The reporting and regulatory requirements for QFI program trading have been implemented in accordance with the principle of fair treatment for domestic and foreign investors. Echoing the QFI system, we believe that the Stock Connect channel will also gradually implement requirements following the same principle.
10. Optimize the management approach for cross-border investment models. Optimize the management of businesses such as total return swaps under the QFI channel and clarify and improve the access management, daily supervision, and penalty arrangements for businesses through rules.
Our Observations
This is the first time that the CSRC has mentioned the total return swap (TRS) business via QFI channels in an official document. This implies official recognition of the rational and necessity of QFI institutions to meet certain requirements while conducting total return swap business through the QFI channel (QFI Channel TRS Business).
The CSRC proposes to optimize the management of this business and, through rules, clarify and improve the access management, daily supervision and penalty arrangements for the business. This means that while conducting this business, certain requirements must be met and are subject to the CSRC’s supervision and management. To this end, the CSRC needs to formulate rules and provide a clear basis for access and daily supervision. This also means that if QFI institutions wish to engage in the QFI Channel TRS Business, they need to follow the relevant rules, including but not limited to obtaining prior endorsement from the CSRC and complete the relevant information reporting afterwards.
The above statement echoes the see-through regulatory provisions in the program trading rules that were implemented this year. The Detailed Implementation Rules for the Management of Program Trading (Implementation Rules) came into effect on July 7, 2025, and were issued by the three PRC stock exchanges, i.e., the SSE, SZSE and BSE. The Implementation Rules propose principled provisions on the see-through requirements for program trading investors.
The Implementation Rules stipulate that program trading investors, if entering into TRS with clients and conducting program trading through their own accounts, should report the relevant client information as required by the relevant exchange. The specific reporting requirements will be stipulated by the relevant exchange.
According to the Implementation Rules, if a QFI institution, as a program trading investor, enters into TRS transactions with its overseas clients, it should report the information of the counterparties to the TRS as required by the relevant exchange.
V. Enrich Service Support
11. Allow domestic licensed professional institutions to provide investment advisory services to foreign investors. Accelerate the formulation of securities and fund investment consulting business rules and support domestic licensed financial institutions in providing securities investment advisory services to qualified foreign investors. Undertake more research on the feasible options allowing domestic institutions to provide discretionary investment advisory services to foreign investors.
Our Observations
The securities and fund investment consulting business rules have been drafted and solicited for comments for quite some time. The consultation paper proposed to permit the conduct of such business, meaning that domestic licensed financial institutions (including foreign-owned licensed financial institutions) that meet the qualification requirements can, upon approval, provide securities investment advisory services to third-party investors (including QFIs).
Some securities investment fund managers had already launched such businesses, but for several years, new businesses haven’t been approved due to a lack of a clear legal basis. Once the relevant rules are formally issued, domestic licensed financial institutions (including foreign-owned financial institutions) that meet qualification requirements, such as qualified securities investment fund managers and securities brokers, may engage such businesses through obtaining business licenses.
Our Observations: Seeing the Future in the Small Details – The Next Priorities for Capital Market Opening-up
While the CSRC unveiled the Work Plan, the reports and speeches delivered by the Governor of the People’s Bank of China (PBOC) and the Chairman of the CSRC highlighted the priorities for the next phase of China’s capital market “high-level opening-up”.
On October 28, PBOC Governor Pan Gongsheng delivered a report to the Standing Committee of the National People’s Congress on the financial work over the past year. Regarding the capital market aspects of high-level opening-up, he highlighted two points: (1) optimizing the QFI system, and (2) improving the schemes for the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect, Bond Connect and Swap Connect. While last year’s financial work report mentioned the two financial centers of Shanghai and Hong Kong, this year Governor Pan referred to them in very concise terms, noting that the development of Shanghai as an international financial center is steadily advancing, and the status of Hong Kong as an international financial center is being consolidated and elevated. We have reason to believe that with the support of the central government, Hong Kong’s role as an international financial center will continue to be strengthened and enhanced.
In addition to optimizing the QFI system, CSRC Chairman Wu Qing’s keynote speech at the 2025 Financial Street Forum Annual Conference, mentioned enhancing the Connect schemes. He spoke of improving the quality and efficiency of overseas listing filings, deepening cooperation between the mainland and Hong Kong markets, and striving to promote a new development paradigm characterized by coordinated development between onshore and offshore markets. The keynote speech also mentioned the positive interaction between opening-up and security.
Chairman Wu’s remarks were concise but they accurately conveyed the principle that, firstly, onshore and offshore markets need coordinated development, and secondly, capital market must seek a balance between the objectives of opening-up and security. We believe that the phrase “positive interaction between opening-up and security” implies that open measures and financial security are equally important. On one hand, further opening-up can only be pursued once regulatory standards have reached a certain level; on the other hand, after opening up, it is essential that regulatory measures keep pace to safeguard the security of the financial markets.
We anticipate that the regulatory authorities will continue to emphasize and implement this principle, progressively advance the see-through regulations of both onshore and offshore markets as appropriate, prevent cross-border regulatory arbitrage, and promote the healthy development of China’s capital markets.
