Thanks for your comment. We certainly agree that once the regulations and rules are clarified, it would be an added attraction for potential investors looking to gain China equity exposure onshore. There have been reports since last year that CSRC intends to make things more “investor friendly” and has been working closely with SAFE to grind out definitive rules re: tax on capital gains, tax treaty benefits, streamlining the repatriation process, etc.

QFII's and those borrowing the quota have been living with this uncertainty for 10 years, and new players keep coming on board. I suppose this indicates that the much talked about potential capital gains tax (speculated to be around 10%) is not too much of a concern. There are fine points about retroactivity, computation methodology, tax treaty benefits, … etc. which investors appear to be coping with. An interesting question is whether this uncertainly give rise to a risk premium, which investors could harvest once the uncertainty is resolved.

I find these resources on the issue quite useful:
[1] QFII & RQFII – a Clearer Tax Policy is Necessary … http://bit.ly/1cT2XeA
[2] QFII & Capital Gains Tax: A Current Topic for Financial Institutions http://pwc.to/1dlfS6N
If you have good resources to share with us and other readers, please leave us another comment. (This link will take you straight to the comment box: http://cfa.is/13fYyOT )

We also have another blog post on QFII and RQFII. If you’re interested in taking a glance, it’s at: http://cfa.is/105zJ1l and we’d appreciate your comments. (Direct link to comment box: http://cfa.is/16Bw0zX )

Thanks again for your comment.