The scheme to allow mainland institutions to invest overseas could be implemented only after the launch of an offshore renminbi center in Hong Kong, said a senior researcher yesterday.

"We were informed that China's QDII (qualified domestic institutional investor) scheme is not ready yet as many conditions are still under discussion," Anthony Lok, managing director of BOCI, a research body of Bank of China, told reporters.

"We expect the off-shore renminbi center could be set up firstly, then comes the QDII scheme," said Lok, adding that the details on the off-shore center may be released at the end of this year or early next year.

BOCI estimated that around 80-billion yuan is circulating in Hong Kong.

The launch of QDII scheme will not lead to an influx of renminbi into the Hong Kong market because the currency has entered through different channels, said Lok.

Meanwhile, mainland regulators will set restrictions for QDIIs to invest in overseas markets at the beginning.

There is much speculation on when mainlanders will be allowed to invest in the overseas market since China opened its capital market by allowing selected QFIIs (qualified foreign institutional investors) to invest in mainland's A-share and bond markets late last year.

Seven investment banks have been granted the status to trade in the mainland's US$500 billion stock markets.

Although the short-term impact of QFIIs on mainland's A-share market is quite modest, "we expect that interest and invested capital in QFII accounts will increase rapidly," said Lok in a recent research report.

The investment amount for each QFII may reach US$600-US$700 million at the current stage, but it is hard to forecast whether the amount will be raised to US$4 billion by the end of this year, as estimated by the Financial Times, said Lok.

In the report, BOCI recommended 61 A-shares for QFIIs, which are with a cut-off free-float market cap of US$250 million and a minimum daily turner of US$1 million, including Bao Steel and Shenzhen Energy.

(China Daily HK Edition August 20, 2003)