QFII (Qualified Foreign Institutional Investor) is short for Qualified Foreign Institutional Investor. QFII mechanism refers to the qualification accreditation system for foreign professional investment institutions to invest in China. QFII system, as a transitional institutional arrangement, is a special channel to realize the orderly and steady opening of the securities market in countries and regions where the capital account has not been fully opened. The experience of markets including South Korea, Taiwan Province Province, India and Brazil shows that QFII is a steady way to introduce foreign capital through the capital market when the currency is not freely convertible. Under this system, QFII will be allowed to remit a certain amount of foreign exchange funds and convert them into local currency, and invest in the local securities market through a special account under strict supervision and management. All kinds of capital gains, including dividends, bid-ask spreads, etc., can be converted into foreign exchange for remittance after examination, which is actually a limited opening of the domestic securities market to foreign investors.

QFII is a transitional system for a country to introduce foreign capital and open its capital market to a limited extent when its currency is not fully convertible and its capital account is not yet open. This system requires foreign investors to meet certain conditions if they want to enter a country's securities market, remit a certain amount of foreign exchange funds after approval by the relevant departments of the country, and convert them into local currency through a special account under strict supervision to invest in the local securities market.

What kind of overseas institutional investors are qualified? There are many conditions, the core of which is that it should not be short-term speculation, but should be medium-and long-term investment. The experience of Taiwan Province Province and South Korea shows that after the introduction of QFII mechanism, the rational investment concept, which is keen on investing in blue-chip stocks, paying attention to dividends of listed companies and paying attention to the long-term development of enterprises, has become popular, and speculation has decreased, which has reduced the huge fluctuation of the market to some extent. Therefore, introducing QFII mechanism to attract qualified foreign institutional investors will help to further expand the ranks of institutional investors; We can also learn from foreign mature investment concepts to promote the effective allocation of resources; At the same time, promote listed companies to improve corporate governance and accelerate the convergence to the modern enterprise system. The essence of QFII system is a creative capital control. Under this mechanism, anyone who intends to invest in the domestic capital market must buy and sell securities through qualified institutions, so that the government can carry out foreign exchange supervision and macro-control, with the aim of reducing the impact of capital flows, especially short-term "hot money", on the domestic economy and the securities market. Through QFII system, the management can restrict and guide the entry of foreign capital, make it adapt to the development of domestic economy and securities market, control the influence of foreign capital on the independence of domestic economy, curb the impact of speculative hot money from abroad on domestic economy, promote the internationalization of capital market and promote the healthy development of capital market.