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Discusses the controversy surrounding China's qualified domestic institutional investor (QDII) scheme. Overview of QDII and qualified foreign institutional investor; Foreign exchange reserves of China; Factors that added pressure for foreign exchange regulators to keep the balance of foreign exchange inflow and outflow and maintain the stability of the yuan; Government departments involved in the policy-making of QDII.

The article reports on the signs of a decline in the growing foreign reserves of China, boosted mainly by its trade surplus and foreign direct investment. According to Cai Qiusheng, a senior official at the State Administration of Foreign Exchange (SAFE), the agency's statistics showed that the foreign reserves had declined for the first time since December 2003. The decline meant that some foreign investors withdrew their money out of mainland markets to invest in safe havens elsewhere in the midst of the global financial crisis.