Yi Gang, deputy governor of the People’s Bank of China, announced on June 7 that his institution will provide the US with 250 billion yuan (US$38.4bn) in RQFII (RMB [yuan] Qualified Foreign Institutional Investor) quotas, allowing for greater American investment in China’s stock market.
The RQFII mechanism, launched in 2011, allows approved foreign institutions to invest limited amounts of overseas-held yuan into the Chinese stock market, and is designed to promote the internationalization of the Chinese currency. “The internationalization of the yuan is driven by the market.
It saves on cost to invest and trade in yuan,” Yi told a press conference following his announcement.
According to Chinese media reports, by May 30, China’s State Administration of Foreign Exchange had approved 502 billion yuan (US$77.2bn) in RQFII quotas for 10 countries and regions, with Hong Kong topping the list with a 270 billion yuan (US$41.5bn) line of credit. Experts said the new offer to the US proved that the Chinese government is confident in the yuan exchange rate, and hopes to recoup more offshore yuan.
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