Study On The Chinese QFII In The Internationalized Securities Market

Qualified foreign Institutional Investor (QFII) system is released as a transitional system in Chinese mainland in December, 2002. It's an important initiative in the strategy of the opening to the outside of our capital market. Nowadays, international securities investment has gradually becoming an important form of the flow of capital. It's an inevitable initiative to open capital market in the trends of global economic integration and global capital market integration.China has implied QFII system for five years, during this period, the amount of examination and approval and the sum of investment has been increasing unceasingly. On the one hand, QFII bring their scientific financial management system and advanced investment philosophy to our domestic stock market. On the other hand, OFII are generally veteran in investment, and they are very demanding in the performance, the company organization, the business management and so on of the investee's, all of which has fundamentally improved the management of Chinese domestic listed company and has changed the situation of nonparticipating of Chinese domestic listed company. The implication of the QFII system could expand the capacity of the stock market and raise the raise the rate of capital flow. By limitation and monitoring of the capital account, we could effectively control the fluctuation of the foreign exchange market caused by the foreign capital inflow. So, the implication of the QFII system will promote the smooth and ordered development and will speed up the process of internationalization of Chinese stock market.Because of the characteristics of emerging and transition, there are defects both in the means by which Chinese departments in charge supervise and in the design of the legislation in the field securities. All of these awarded the veteran foreign Institutional Investor with the opportunities that can be exploited to seek illegal benefits. It's no doubt that the QFII system has brought benefits to Chinese capital market, but we have also noticed that QFII are active in many recently arising cases of Chinese stock market. In July, 2008, intermediate people's court in the Guangxi Zhuang nationality autonomous region accepted and heard a case of disputes about stock transaction between Nanning Sugar Cooperation and Martin Currie Investment Management Ltd. and another cooperation. This marked the first case that prosecute QFII in China has turned up. QFII system involves the systems of several areas, such as finance, securities, foreign exchange and law. Whether we could integrate and harmonize these related systems to make them becoming a powerful resultant force decides the results of implication of QFII system. Over the five years of the implication of QFII system, the defects of it are categorized. That is to say, no matter it's the problems of the disclosure of in formation in securities, or the problems of the fluctuations of market exchange rate, or the problems of the refining of law, it can be grouped under the areas that had been talked above. To be more specific, the defects of Chinese QFII system mainly include: the deficiency of the system of disclosure of information, the mode of separate supervision can't adapt the trend of mixed operations of finance, the hasty of opening of domestic market under the pressure of other countries, the system of taxation on QFII badly needs to be refined.All of the problems talked above illustrate that, on the one hand, there are defects in Chinese QFII system. On the other hand, it's right to refine it. If we take the right steps to deal with the problems according to the specific feature, we could achieve the goal of make it perfect.Before thinking over how to refine our QFII system, we should extract experiences and draw lessons from other emerging capital market states'and regions', such as Korea, India and Chinese Taipei. They undergo a period of exploration in the initial stage of the opening of domestic capital market. Because their own situations differ from each other, they chose different modes of QFII system and finally got different effects by the application of the modes they chose. It will be beneficial to extract experiences and draw lessons from them, for the sake of economic cost, political costs and time costs.In the author's opinion, Chinese QFII system should be refined in the following aspects: first, keep on assuming the progressively opening strategy, which is fit for the situation of our stock market. Second, strengthen the legal restriction on the foreign capital to reduce the negative impact of QFII on our securities and investment market. Third, reinforce the supervising of the investment of QFII in stock market, especially in the disclosure of information. Fourth, set up scientific taxation system on foreign investor. Fifth, cultivate proficient personnel in finance, securities and law, and build up a veteran team of management. Last, enhance the cooperation and communication with foreign regulatory authorities.Finally, it should be indicated that there may be many defects of this article. However, we hope the article can make more scholars pay more attention to the Chinese QFII, and make the legislation of internationalized stock market perfect. If the target was reached, it will be useful for the protection of the investors and the internationalizing process of the stock market.