QFI in Focus: five years of regulatory change

This client alert reviews the key regulatory developments affecting the QFII/RQFII regime (now the QFI regime) since the introduction of the reformed QFI rules issued by the China Securities Regulatory Commission (“CSRC”) back in 2020 (“2020 Measures”) and highlights their practical implications for foreign investors.

1. Expansion of Permitted Instruments and Investment Scope

A core objective of the 2020 Measures was to broaden significantly the range of financial instruments accessible to QFIs and to align the regime more closely with international practice, which materially expanded the permissible investment universe, including by allowing access to additional asset classes such as private investment funds, commodity and financial futures, and bond repurchase transactions, among others.

Investment scope under the 2020 Measures

Under the 2020 Measures, QFIs are permitted to invest in the following financial instruments:

a. Shares, depositary receipts, bonds, bond repos and asset-backed securities that are traded or transferred on stock exchanges;

b. Shares and other types of securities traded on the NEEQ (also known as “The New Third Board”);

c. Products traded on the interbank bond market and bond, interest rate and FX derivatives that the PBOC allows QFIs to invest in;

d. Public securities investment funds;

e. Financial futures contracts listed and traded on the CFFEX for hedging purposes;

f. Commodity futures contracts listed and traded on futures exchanges approved by the CSRC;

g. Options listed and traded on trading venues approved by the State Council or the CSRC;

h. FX derivatives that the SAFE allows QFIs to trade for hedging purposes;

i. Initial public offerings, bond offerings, asset-backed securities offerings, secondary share offerings and subscription for allotment on stock exchanges and the NEEQ;

j. margin financing and securities lending, as well as securities lending transactions under the securities refinancing mechanism, on stock exchanges; and

k. Private investment funds established by securities and futures institutions or by private fund managers (PFMs) registered with the AMAC, where the investment scope of such private investment funds must comply with the QFI’s investment scope permitted by the CSRC.

Over the six years since 2020, the Chinese regulators have continued to refine the QFI regime, with a clear policy focus on: (i) simplifying market entry; (ii) broadening investment opportunities; (iii) expanding access to derivatives markets; and (iv) enhancing operational flexibility. Taken together, these developments have positioned the QFI regime as one of the principal channels for foreign investors seeking exposure to China’s onshore capital markets.

Post‑2020 Regulatory Developments

• Commodity and financial futures and options: On 13 October 2021, the CSRC issued the Announcement on Participation in Trading of Financial Derivatives by Qualified Foreign Institutional Investors₁ and RMB Qualified Foreign Institutional Investors . With effect from 1 November 2021, this announcement, allowed QFIs to trade commodity futures and commodity options listed on futures exchanges approved by the State Council or the CSRC, and, provided that such trading is conducted solely for hedging purposes, permitted QFIs to trade stock index option contracts listed on such futures exchanges.

  Based on information publicly disclosed on the official websites of the relevant futures exchanges, as at May 2026, QFIs are permitted to trade a total of 115 specific varieties of commodity futures, commodity options and stock index option contracts.

• Bond repos transactions in the China Interbank Bond Market (CIBM): On 26 September 2025, the PBOC, CSRC and SAFE jointly issued the Announcement on Further Supporting Overseas Institutional Investors to Conduct Bond Repurchase Transactions in China’s Bond Market₂. This announcement permits overseas institutional investors that already trade cash bonds in China’s interbank bond market to engage in bond repo transactions.

  On the same date, the National Interbank Funding Center, China Central Depository & Clearing Co., Ltd. (CCDC) and Shanghai Clearing House Co., Ltd. jointly issued the Notice on Jointly Supporting Overseas Institutional Investors in Conducting Bond Repo Business in the Interbank Bond Market₃. On this basis, QFIs that trade cash bonds in the interbank bond market may also conduct bond repo transactions.

• Bond repos transactions in the exchange bond market: On 19 December 2025, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE), together with China Securities Depository and Clearing Co., Ltd., issued, respectively, the Notice on Matters Relating to Supporting Overseas Institutional Investors in Conducting Bond Repo Business on the Shanghai Stock Exchange₄ and the Notice on Matters Relating to Supporting Overseas Institutional Investors in Conducting Bond Repo Business on the Shenzhen Stock Exchange₅. QFIs meeting the relevant eligibility criteria may now conduct bond repo transactions in the exchange bond market.

• ETF options: On 17 June 2025, the CSRC issued the Announcement on Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors Participating in Stock Option Trading₆. With effect from 9 October 2025, this announcement permits QFIs to trade exchange‑traded fund (ETF) options listed on trading venues approved by the State Council or the CSRC, provided that such trading is conducted solely for hedging purposes.

  Based on information publicly available on the official websites of the SSE and the SZSE, 9 specific ETF option contracts are currently accessible to QFIs.

• China Government Bond (CGB) Futures: On 21 April 2026, the CSRC issued the Announcement on Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors Participating in China Government Bond Futures Trading₇. Under this announcement, QFIs may trade CGB futures contracts listed on the CFFEX, again provided that such trading is conducted solely for hedging purposes.

  On 24 April 2026, CFFEX followed up with the Notice on Matters Relating to Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors Participating in China Government Bond Futures Trading₈ and commenced accepting applications from QFIs for participation in CGB futures trading.

2. Excluded Instruments and Activities

Despite the significant broadening of access, certain instruments and activities remain outside the current QFI framework. In particular, designated types of QFIs, including hedge fund QFIs, are currently prohibited from engaging in securities borrowing and lending (including short selling). The CSRC has maintained this prohibition, and, as at June 2026, there is no formal timetable for its relaxation. Any attempt to use the QFI licence for strategies involving onshore securities borrowing/lending or short selling would be rejected at the stage of QFI application or business plan registration.

3. Reporting and Disclosure Obligations

The QFI regime imposes disclosure obligations both at the licensing stage and on an ongoing basis following approval.

• Initial application disclosures: A QFI applicant must submit comprehensive information to the CSRC covering its corporate profile, ownership and control structure, financial condition, regulatory status, investment experience, source of funds, governance and compliance framework, and key personnel. Applicants must also provide a detailed investment plan, including account structures, intended investment strategies, asset allocation, and custodian arrangements. Hedge fund applicants are typically expected to provide enhanced disclosures regarding their China investment strategy, risk management framework, quantitative or programme trading activities, fund structure and major investors.

• Ongoing reporting obligations: Following approval, a QFI is required to submit periodic reports through its custodian(s), including monthly reports on positions, accounts, capital movements and investment activities, and annual reports updating key information previously disclosed to the CSRC. Where a QFI intends to add new funds or accounts under its licence, the relevant investment plan filings must also be updated.

  In addition, QFIs must promptly report material events, including changes to custodians, controlling shareholders or ultimate controllers, major litigation, significant overseas regulatory actions, and other material changes required by the regulators. Certain changes also trigger separate filing obligations with SAFE, including changes to the QFI's name, custodians or other material information, as well as deregistration filings upon licence cancellation.

• Ad hoc reporting obligations: The CSRC may also require ad hoc reporting on specific matters, including overseas hedging arrangements associated with a QFI's PRC investments. Furthermore, settlement failures arising from insufficient funds ("over-purchases") must be reported to the relevant regulators and market infrastructure institutions.

• Programme trading reporting: QFIs engaging in programme or algorithmic trading in the PRC securities or futures markets are subject to additional reporting requirements, including pre-trade filings relating to account information, funding arrangements, trading strategies, trading systems and designated contacts. Enhanced disclosure obligations apply to high-frequency trading activities, with ongoing reporting required for material changes to previously reported information.

Taken together, these requirements reflect the regulators' emphasis on ongoing transparency regarding a QFI's ownership, governance, financial condition, investment activities and trading practices throughout the life of the QFI licence.

4. Trading-Related Compliance Issues

In addition to the QFI licensing and reporting framework, QFIs investing in China's capital markets are subject to a range of trading-related compliance requirements, particularly in relation to ownership disclosures, position monitoring, investor aggregation rules and trading restrictions.

• For listed equities:

  • QFIs must monitor their shareholdings on an ongoing basis, as disclosure obligations may arise when specified ownership thresholds are crossed and upon subsequent material changes in holdings. PRC rules also require holdings of persons acting in concert, affiliated entities and certain equity-linked instruments to be aggregated for disclosure purposes. In addition, foreign investors remain subject to foreign ownership limits at both the individual-investor and aggregate market levels, and substantial shareholders may be subject to restrictions and disclosure requirements when reducing their holdings.
  • Convertible bonds ("CBs") are treated as instruments with both debt and equity characteristics. Accordingly, CB investments may give rise to standalone disclosure obligations and, where conversion rights are exercisable, may also need to be taken into account when assessing equity ownership disclosure thresholds. QFIs should therefore monitor equity and convertible bond positions holistically, particularly where holdings relate to the same issuer.
  • QFIs investing in dual-listed companies, such as A+H issuers, should also consider cross-border disclosure obligations. In practice, holdings across different share classes may need to be monitored on a consolidated basis, and disclosures made in one market may trigger corresponding disclosure obligations in another. Although the PRC enforcement focus has historically been on investors holding both onshore and offshore shares, QFIs should remain mindful of the potential interaction between the relevant disclosure regimes.

• For futures and options trading: QFIs are generally subject to the same exchange-imposed trading limits, position limits and large-position reporting requirements applicable to domestic investors. Certain financial futures transactions remain subject to hedging-related requirements, while positions exceeding prescribed thresholds may trigger reporting obligations to the relevant exchange.

  A particular area of regulatory focus is the concept of "connected accounts". For purposes of applying position limits and large-position reporting requirements, exchanges may aggregate positions held across accounts that are under common ownership or control, or that are effectively managed as a single trading interest. QFIs operating multiple funds, managed accounts or affiliated investment vehicles should therefore carefully assess potential aggregation risks when monitoring futures positions.

• For investments in the China Interbank Bond Market ("CIBM"): QFIs should pay particular attention to concentration disclosure requirements and reporting obligations relating to connected-party transactions. Additional reporting and disclosure requirements may arise where related-party transactions exceed prescribed materiality thresholds.

Overall, the QFI trading framework requires careful monitoring of ownership levels, aggregation rules, trading positions and related-party activities across asset classes. Robust compliance controls and coordination among investment, legal, compliance and operations teams remain critical to managing these obligations effectively.

5. Looking Ahead

The reforms to the QFII / RQFII regime have substantially broadened foreign investors’ access to China’s capital markets, particularly in relation to derivatives and non‑exchange‑traded products, and have considerably enhanced the risk management toolkit available to QFIs.

At the same time, important restrictions remain, including in relation to securities borrowing/ lending, short selling and certain alternative strategies. The regulatory landscape is continuing to evolve, and we expect further incremental liberalisation, coupled with ongoing emphasis on risk control, transparency and orderly market development.

Should you have any questions or require further assistance regarding any of the above, please do not hesitate to Melody Yang at YaoWang Law Offices (our strategic alliance firm in China Mainland).

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