China increases foreign investment allowance

| July 11, 2005 | 0 Comments
China increases foreign investment allowance

Officials in China said on Monday that they will lift the amount of money foreign investors can put into its stock market to a total of $10 billion.

This is more than twice the current limit of $4 billion allowed under the Qualified Foreign Institutional Investors program.

No time frame for the new limit was announced, however.

The move is an effort to reinvigorate China’s markets. In the first quarter of 2005 only 1 percent of funds raised by companies in China came from stocks and bonds.

News of the change, although not a surprise, sent Shanghai’s composite index down 0.6 percent to an eight-year low.

This decline put the market down 20 percent on the year so far, on top of a 15 percent retreat in 2004.

One analyst said that while the increase in the amount of money foreign investors can put into the Chinese markets is a positive move, he pointed out that this does not mean that foreign investors will actually invest more money in the markets there.

Meanwhile, the China Securities Regulatory Commission, which regulates China’s market announced that it would suspend IPOs for the time being to lessen fears of a glut of new issues on the market.

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