China lifts QDII quota, investors rush into US stock funds
Beijing raised the QDII quota to a record $183 billion, triggering a rush into US-focused funds that managers quickly moved to limit.
Chinese investors are rushing into overseas assets, particularly US equity funds, after regulators raised outbound investment quotas, releasing pent-up demand amid low domestic yields and a tightening of unofficial channels for moving money abroad.
Late last month, the foreign exchange regulator lifted the outstanding Qualified Domestic Institutional Investor (QDII) quota by $6.8 billion to a record $183 billion. The move came even as Beijing continued its crackdown on what it considers illegal overseas investing through online brokerages, while broadening authorised routes to foreign markets.
The strength of demand became evident within days. A QDII fund tracking the Nasdaq 100 raised its daily subscription cap from 10 yuan to 5,000 yuan on September 9, only for its manager, Wanjia Asset Management, to sharply limit inflows again a day later to 100 yuan per individual investor.
"It means there was explosive inflows so the fund manager needed to limit the subscriptions," said Ivan Shi, head of research at fund consultancy Z-Ben Advisors. "There remains huge appetite in China for U.S. tech stocks."
Similar patterns emerged elsewhere. China Universal Asset Management eased restrictions on its Nasdaq 100 ETF before tightening them again two days later, while TruValue Asset Management reversed course on its QDII fund investing in global chip stocks.
The rush underscores Beijing's difficulty in managing capital outflows. Confidence in the domestic economy remains fragile, China's 10-year government bond yield sits more than three percentage points below US Treasury yields, and local equities have broadly lagged the double-digit gains posted by US stocks this year.
Portfolio investment recorded a deficit of $426 billion in 2025, according to balance of payments data, with net outflows reaching $146 billion in the first quarter of this year.
"Chinese demand for global asset allocation is getting bigger and bigger," said Xu Jie, a fund manager at Yuanzi Investment Management, which invests in global markets through QDII exchange-traded funds. Long-term investors need to "diversify risks and share growth in major global markets," he said.
The United States is the top destination for QDII funds, accounting for nearly half of the roughly 1 trillion yuan ($150 billion) business, according to Shanghai Securities.
Most US-bound ETFs trade at hefty premiums to their net asset value, reflecting investors' eagerness to secure limited overseas exposure. A Shenzhen-listed ETF tracking the Nasdaq-100 Technology Sector Index traded at a premium of 24% on Wednesday.
"The premium just reflects strong household demand on global assets," said Zhaopeng Xing, senior China strategist at ANZ. China's balance of payments has turned positive recently on strong trade inflows, "but the regulators still need a balance to control outflows," he said.