Law Thinking On Introducing Of QFII System

Qualified Foreign Institutional Investor (QFII) system is a transitional system by which a lot of countries and regions, especially the new developing market economies generally implement the importation of foreign capital and open the capital market limitedly in a situation that the currency has not totally been converted freely and the item of the capital has not been opened yet. This system is a stage that the new developing market countries or regions must pass through when they totally open the capital market. In the 1990s, a batch of new developing market countries and regions, for example, South Korea, India, Brazil, Taiwan of our country successively implemented this system and made good results. As our country joins WTO, the opening-up of the capital market of our country is imperative. In order to lighten the impact totally opening the capital market brings to our country and accumulate experiences, after repeated tests by relevant parties, on November 5, 2002, China's Securities Regulatory Commission and the People's Bank of China jointly released "the temporary means of management of investment of securities within the territory of qualified external institutional investors" implemented as of December 1, 2002. Introduction of QFII system is continuity and expansion of the policy of opening-up of China and absorbing the foreign capitals. It has brought vigor for the Chinese capital market, has strengthened investment confidence of vast domestic medium and small investors, help building the market atmosphere of the value investment and reason invest, and take precautions against the invasion and attack to the capital market of our country by the idle international fund.While very big achievements have been made, so many drawbacks have appeared in QFII systems in our country as the threshold of investment is too high and there are gaps and omissions in supervision. So after trying three years, China Securities Regulatory Commission and the People's Bank of China have issued the new " management method of investment securities within the territory of qualified external institutional investors " together and the relevant regulations. This text states the great differences of new-old "methods" and their inherent reason through comparing and analysis and states the main content and the developing direction of QFII system of our country . This paper is divided into four parts mainly. The first part is a summary of QFII system, in which the author discusses the concept, principle and contents of QFII system so as to expect that there is a clear outline to it and lay the foundation for other parts of writing. In the second part, the author mainly analyses the setting-up, meaning and risks of QFII system in our country systematically in order to prove that QFII system is a double-edged sword, must be specified to develop its merits while avoiding its shortcomings. The third part speaks of QFII systems of other new developing market countries, compares the differences between Taiwan QFII system and QFII of our country and proves especially the development of Taiwan QFII system. By contrast, it is well known that the system of our country is very strict. Although it can prevent the financial risk, it suppresses the external institutional investors to enter China at the same time too. The fourth part is comparing the new method with the old method. By contrast, it is clear that QFII system of our country develops towards the low standard, attracting the long-term steady investors and supervising effectively. The author has put forward small suggestion in this in order to perfect this system further.