China's banking regulator will not grant additional quotas for banks to invest their clients' money overseas under the Qualified Domestic Institutional Investor (QDII) scheme until the current investment quotas have been fully used up, a Hong Kong newspaper reported.

The South China Morning Post quoted Frederick Ma, Secretary for Financial Services and the Treasury, as revealing China's plan after his meeting with Liu Mingkang, chairman of China Banking Regulatory Commission (CBRC).

"Mr Liu told me that since only a small portion of the QDII quota had been sold, there was no need to grant more. The CBRC will review the situation when all the existing quotas are used," Ma said.

China launched the scheme last year to allow domestic financial institutions to invest overseas as part of efforts to trim its forex reserves, mop up excess liquidity and ease the upward pressure on the yuan.

However, banks and funds have only used a small portion of their quotas due to lacklustre investor interest, given regulatory restrictions that allow QDII funds to invest only in low-yielding fixed-income products.

The banking regulator last week widened the investment portfolio of such schemes to include foreign stocks to help banks improve their investment performance. The move lifted the Hong Kong stock market to a record intraday high on Tuesday.

Following a meeting with Shang Fulin, chairman of the China Securities Regulatory Commission, Ma said Shang rejected the speculation that the regulator required local firms to list on the domestic market if their initial offering was less than $1 billion.

He quoted Shang as saying that more Chinese firms were selling A shares instead of H shares because of their higher valuations in the mainland.