"The RQFII program is very positive," said Wu Kan, a fund manager at Dazhong Insurance Co. in Shanghai, which oversees $285 million. Still, "the 200 billion-yuan quota isn't big enough to shore up stocks immediately."

While the yuan is freely convertible for trade transactions, investment in stocks or bonds onshore can only be made using quotas assigned by the government and direct investments need regulatory approval.

The Shanghai index has lost 5.8 percent this year, while the MSCI China Index of mostly Hong Kong-traded shares, open to overseas investors, has gained 11 percent as U.S. bond purchases spurred foreign funds to pour money into emerging markets.

China also plans to boost its stock markets by announcing bigger tax deductions on dividends for long-term investors, the Xinhua News Agency reported over the weekend, citing the CSRC.

"The tax policy will guide investors to holding stocks for the long term, and companies paying high dividends will attract more attention in the market," Xinhua reported Nov. 10, citing an unidentified CSRC spokesman.

QFII Expansion

China will "definitely" expand the foreign-currency quota provided under the Qualified Foreign Institutional Investor program once the current allotments are filled, Guo said. The central bank and the foreign exchange regulator have no objection, he said.

"We are ready to implement many more measures to help resolve the issue of inconvenience," Guo said at the briefing, held as the 18th Chinese Communist Party congress gathered to elect new leaders. Those changes include tax incentives and rebates for foreign investors, on which there has been "solid progress," and support from other government departments, he said, without giving more details about the policies.

China raised QFII quotas to $80 billion from $30 billion in April. The securities regulator is studying the possibility of boosting the $1 billion ceiling on individual funds in the QFII program, Guo said.

The securities regulator is also studying rule changes that would lower the threshold for Chinese companies to sell shares in Hong Kong, Guo said. Any changes would need the approval of Hong Kong authorities and no formal agreement has been reached yet, according to Guo.

Regulators are studying ways to improve the management of foreign exchange flows, according to Guo. The securities regulator is considering rules allowing large institutional investors, to move money out of China in stages, either within a few years or in a single year, he said.

"In the past, we encouraged inflows and restricted outflows of funds," Guo said. China should move to "more balanced" and "more neutral" measures, he said. "That doesn't mean that there will be no control at all. There will certainly have to be some control so that market movements will not be too volatile," Guo said.

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