The Qualified Domestic Institutional Investors ("QDII") program has been the major channel for domestic financial institutions to invest overseas since its launch in 2006. Under China's separate-commission approach to supervising its financial system, the QDII program is not subject to a single uniform set of regulations. Instead, the three former regulatory commissions for banking, securities and insurance each issued respective rules and applied them to financial institutions under their own supervision. As a result, different types of financial institutions are subject to different QDII rules (including commercial banks and trust companies, securities firms and fund management companies, insurance companies), and the scope of and restrictions on overseas investments vary from type to type. In general, except for insurance QDIIs, which have a relatively wider investment scope and are eligible to invest in assets such as qualified offshore equity funds and real estate, the QDII program mainly permits investments in offshore securities, which are subject to strict restrictions. For instance, the QDII rules for banking, securities brokers and mutual funds explicitly prohibit investment in offshore hedge funds.
