China To Liberalize Its Fund Management Industry With New Rules

The Chinese securities regulator issued two sets of rules last week aimed at further liberalizing its fund management industry, according to announcements posted on the organization’s official website.

A draft rule regarding the supervision of Chinese private equity funds was issued by the China Securities Regulatory Commission (CSRC) to offer clarity on limited partners (LPs) and marketing methods for the industry.

To become a qualified LP in private equity funds, both institutional and individual investors must meet one of three criteria: to have at least RMB10 million (US$1.6 million) in net assets; to have individual financial household assets of at least RMB3 million (US$480,000); or to have an average annual individual income of at least RMB500,000 (US$80,000) in the last three years.

They must commit at least RMB1 million (US$160,000) to a private equity fund, and also have relevant risk recognition and tolerance levels, says the draft, which is gathering public opinions before being finalized.

Private equity funds are not allowed to market their products to the public through the media, industry forums, conferences, cellphone messages, social media and emails. They also cannot promise the safety of investors’ principles, or guarantee certain rate of returns.

At the same time, the CSRC also issued new rules regarding public mutual funds, adopting a registration-based system to replace an approval mechanism that has been in place for years.

The new guidelines will be effective on August 8.

CSRC says it will strengthen supervision on whether public mutual funds have operated in accordance to regulations, and on enforcing compliance and implementation to protect the interest of investors.

The securities regulator says it will finish all registration processes for mature mutual funds products within 20 days after it receives registration documents.

China Expert network