Home ForexArticles Exclusive-StanChart suspends new investments in offshore channels by clients from China By Reuters

Exclusive-StanChart suspends new investments in offshore channels by clients from China By Reuters

by SuperiorInvest

© Reuters. The Standard Chartered bank logo is seen at its headquarters in London, Britain, July 26, 2022. REUTERS/Peter Nicholls/file photo

By Selena Li

HONG KONG (Reuters) -Standard Chartered has suspended new investments by its clients in China in offshore products through a quota-based channel, the bank said, amid a surge in demand for overseas investments due to the weakness of the local market and currency.

The London-based bank, in a statement to Reuters, cited “commercial reasons” as an explanation for the suspension of new investments under the qualified domestic institutional investor (QDII) programme. He did not give more details.

StanChart's move comes amid Beijing's efforts to curb capital outflows, as a weakening yuan and a slowing economy have led savers to shift assets abroad.

The QDII program, first launched in 2006, remains the largest outbound investment channel for Chinese investors. The regime is limited by a quota set by the State Administration of Foreign Exchange (SAFE).

The program helps Chinese corporate and wealth clients invest in offshore funds, bonds and other structured products.

In a client note issued by StanChart last week, which was reviewed by Reuters, the bank said it would not accept new subscriptions to foreign-domiciled funds sold through the QDII program starting last Thursday.

“Standard Chartered (OTC:) China has suspended underwriting of relevant products for commercial reasons,” the bank said in response to questions from Reuters.

Domestic investors' appetite for foreign assets has been growing strongly since late 2022, as China's stock market performance lagged behind that of the United States and other major offshore markets.

China's blue-chip CSI300 index hit five-year lows this month and is down 18% in about a year, hit by an unprecedented debt crisis in the property sector and a lack of large-scale government stimulus.

“Based on the data, it is much more likely that it was a trade decision based on quota limitations, rather than a stab in the dark, that Beijing's guidance forced the issue,” said Peter Alexander, founder and CEO of the Chinese consulting firm Z-Ben. Advisors.

“No new quotas have been issued for StanChart since 2021,” he said. “Clearly there has been an increase in demand in recent months and that would have reached the capacity of the QDII quota.”


As economic and geopolitical woes cause an exodus of investors from China, many have been redirecting money to other markets, including Japan, giving the benchmark index an additional boost as it soars to record highs.

Beijing has unveiled a series of market support measures since last August, including cutting trading costs, slowing the pace of initial public offerings and prioritizing the launch of equity funds.

StanChart's move comes as it faces fresh depreciation pressure in 2024, weighed down by the dollar's resurgence in light of market bets that the Federal Reserve could wait longer than previously expected to start cutting rates.

The yuan has lost about 1.4% against the dollar so far this year.

China unofficially suspended the QDII in 2015, when gyrations in Chinese stock and currency markets caused capital flight. The program was revived three years later, after Chinese stocks stabilized while the yuan gained strongly against the US dollar.

StanChart's move also comes as the Asia-focused bank's chief executive, Bill Winters, spoke last week about opportunities in China, seeing wealth management as a main pillar of growth and its cross-border services giving it an edge over peers. national.

“I see no need or likelihood of material restrictions on capital flows for Chinese savers or corporations,” Winters said on the bank's earnings conference call on Friday.

“I think there have already been some increased restrictions on offshore flows,” he said when asked about the impact of possible restrictive measures from Beijing on his cross-border businesses.

Since 2006, StanChart has received a total QDII fee of $2.8 billion, the third largest among foreign banks behind only HSBC's $4.73 billion and Citigroup's $3.5 billion, according to the latest SAFE data.

The regulator and banks have not revealed how many quotas have been used.

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