* Registration-based system to be used from Aug 8
* Government wants markets to play "decisive" role by 2020
* Mature fund products can issue 20 days after registration
* CSRC also issues draft rules to boost private equity funds
By Lu Jianxin and Pete Sweeney
SHANGHAI, July 11 China issued new rules on
Friday to free issues of public mutual funds from regulatory
approval in what asset managers said was a major step to expand
the still small number of institutional investors in the
country's stock market.
The step is among a slew of other regulatory moves made
recently by the government aimed at letting the markets play a
"decisive" role in the world's second-largest economy by 2020.
The China Securities Regulatory Commission (CSRC), in new
rules to take effect on Aug. 8, will adopt a Western-style
registration-based system in which fund firms need only register
with the regulator to issue products, the CSRC said in a
statement published in its official microblog.
The CSRC "will not restrict the quantities of a product,
will not artificially control the pace of fund issues and will
not interfere the time of issuance," CSRC spokesman Deng Ge was
quoted as saying in the statement.
Simultaneously, the regulator will strengthen supervision on
whether fund firms have operated in line with regulations,
enforcing compliance and implementation to protect the interest
of investors, Deng said.
The changes "reflect a move toward making China's fund
industry market-oriented and operate in line with international
practices," said Wang Ming, head of marketing at Shanghai Yaozhi
Asset Management Co.
"Currently, bureaucracy in the approval system is
time-consuming, with some innovative products take months, even
half a year to win approval, among other problems," Wang said.
Among other improvements in the new regulations, the CSRC
promised to finish all registration processes for mature
products within 20 days after related documents reach the
"For complicated and innovative products, the CSRC may ask
fund managers to offer more materials," including those on
technical preparations on risk control, the new rules showed.
The watchdog will also raise penalties for those fund firms
found to have irregularities, the CSRC said without elaborating.
By the end of May, China had a total of 91 mutual fund
companies with 680 funds managing total assets of 7.25 trillion
yuan ($1.2 trillion), making the domestic fund industry the 10th
biggest in the world, official data shows. Publicly issued funds
accounted for 54 percent.
Stock holdings by professional institutional investors,
dominated by mutual funds and brokerages, only accounted for
10.87 percent of China's total stock market capitalisation by
the end of last year.
The fledging market is dominated by much less sophisticated
retail investors, a result that has led to rampant speculation
in loss-making and other less-capitalised firms and a lack of
interest in blue-chips favoured in more mature markets.
To boost institutional investors, the CSRC has issued new
guidelines to encourage fund managers to innovate and promise to
let more foreign firms into the domestic industry.
On Friday, the CSRC also published a draft of new rules to
support the country's fledging private equity (PE) funds to make
products more market-oriented.
It is not clear when formal rules on the PE funds will be
promulgated, but the draft is typically finalised with
modifications within two months after seeking public feedback.
($1=6.2 Chinese yuan)
(Editing by Matt Driskill)