"We expect the regulators to take action soon to make QDII (Qualified Domestic Institutional Investor) a more effective channel for outflow, and likely measures include allowing investors to have access to global equity markets through bank QDII (currently limited to fixed-income assets) and increasing QDII quotas for non-bank financial institutions," Qu Hongbin, an HSBC economist, wrote recently to clients.

Qu argued that encouraging outflow was the key to introducing two-way flow into the Chinese foreign exchange market the most important pre-condition for China to make a meaningful move toward greater RMB flexibility.

(China Daily 01/16/2007 page4)

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