China's foreign exchange reserve shrank by $513 billion as capital account reversed course and Chinese policymakers have struggled to plug the outflow, part of which is foreign but large chunk of such is domestic money flowing out, including companies paying back their Dollar debt.

Now, policymakers are preparing for other tools to fight inflows.

In a bid to improve upon inflows, China eased restrictions on foreign investments yesterday.

Forex regulator said yesterday that foreign investors accredited through its Qualified Foreign Institutional Investor (QFII) program will no longer be subject to individual quotas assigned by the regulator. So, all QFIIs will be allowed to invest roughly 20 per cent of total assets under management into China without special permission, which shouldn't exceed $ 5 billion. However, one has to take permissions if it exceeds quota.

Another channel of investments (RFQII), where it is possible to invest offshore Yuan back into onshore, was left unchanged.

These two, QFII and RFQII are main channel through which foreign investments now come to China's onshore markets to invest in stocks and bonds.