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From Ted Chen, CFA, FRM, Partner of GREENWOODS ASSET MANAGEMENT:

It was 7:55 am, the morning of Thursday June 21, 2007. “Ted, did you see the news on QDII?” It was George calling from Greenwoods Shanghai office. “Yeah, but it’s been in the market since May 11, we also wrote about this in the April newsletter.” I replied lukewarmly, perhaps it’s time for my usual morning coffee. “No, Ted, you didn’t get it. The earlier QDII announcement was to allow domestic commercial banks to invest overseas… This time, it’s the local brokers and mutual funds that are allowed to raise funds to invest overseas… That should be a really good news for the H-shares!” George exclaimed.

I could feel George’s excitement at the other end of the line, and there is a good reason why George is so excited about this latest QDII policy – China is opening up its $5 trillion war chest, made up of $2.2 trillion household savings and $2.8 trillion corporate savings, for overseas investment. That is a significant move – RMB now has an official channel to go global!

New QDII rule and its profound implication On June 20, the China Securities Regulatory Commission (CSRC), the regulator of domestic listed companies, brokers and mutual funds, issued a new policy to allow domestic financial institutions with the certain minimum requirements to raise funds in RMB for overseas investment, effective from July 5, 2007. This move is seen to further alleviate RMB......................

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