Market players doubt QFII tax will deter investing
18 October 2012
News, Asia, China, Global
By Hui Ching-hoo
Market pundits think the possible imposition of investment gains tax on QFII funds is unlikely to deter foreign institutions from entering the Mainland capital market.
The China Securities Regulatory Commission (CSRC) is reportedly looking to impose a 10% withholding tax on QFII investment gains, although the timetable and details of the policy have yet to be disclosed, according to a report from First Financial Daily on Thursday (October 18).
Xav Feng, head of Lipper Asia Pacific Research, told Asia Asset Management that the primary purpose of the QFII program is to broaden the institutional investor base for the A-share market, though it is expected that the Chinese government will diversify its new income sources by taxing QFII funds.
Mr. Feng thinks the taxation will not hinder foreign institutional investors from applying for QFII licenses as they take a long-term view on investing in China.
As the A-share market has been bearish over the past three years, the Chinese regulator will likely continue to push ahead with the easing of QFII applications, he added.
The State Administration of Foreign Exchange had dished out a total US$30.8 billion in QFII quotas to 157 foreign institutions by September 28.
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