UBS is calling on the Chinese government to promote the country’s troubled equity markets by increasing the amount foreigners can invest in domestic equities and bonds.

The Swiss banking company, which is already the biggest broker of Chinese securities for foreign investors, has been urging Beijing to raise a limit of $800m on the amount of the companies’ investment allowed under the Qualified Foreign Institutional Investor scheme (QFII).

“In the last few months the regulator has become more lenient on the quotas,” commeted Nicole Yuen, head of China equities at UBS. “QFII inflows are going to support other measures that the government is going to take.”

Faced with an equity market that has halved over the past five years, Beijing has been seeking to meet demand. For example, local insurers have been enabled to invest in domestic stocks, while commercial banks have been allowed to set up mutual fund operations.

There are signs that China is considering lifting the “unofficial” limit of $4bn on the QFII scheme. Last month Morgan Stanley was awarded a further quota of $100m, lifting the approved quotas to $3.6bn, according to Florian Gimbel. About 25 companies, including CSFB, Goldman Sachs and Merrill Lynch, invest through QFII.

“The authorities seem to be judging QFII quotas on a discretionary basis rather than having rigid rules but the sums involved are still relatively small,” said Fraser Howie, a commentator on Chinese capital markets.