China urges fund JVs to report health of foreign partners

By Samuel Shen and George Chen

SHANGHAI, Oct 7 (Reuters) - China's securities watchdog has urged fund ventures partly owned by foreign financial institutions such as Fortis (FOR.BR) and AIG (AIG.N) to disclose the financial conditions of their foreign partners, reflecting increasing government concern that the overseas financial crisis might spread to China.

Joint venture fund companies need to report this month how their overseas shareholders have been affected by the escalating crisis, and how that might affect the ventures' operations, according to an e-mailed request by the China Securities Regulatory Commission (CSRC).

"Recently, the international capital markets are hugely affected by the subprime crisis," according the commission's e-mail sent to the fund ventures, a copy of which was seen by Reuters.

"In order to understand foreign shareholders' situations, and strengthen supervision, JV fund companies please obtain information and pay close attention to the operational status of foreign shareholders.

"Please submit after the national holiday a report in the form of an email on how your foreign partners are affected by the financial crisis and how that could affect the joint venture fund company."

A CSRC spokeswoman declined to comment.

CSRC is joining other regulatory bodies in containing risks stemming from the financial turmoil that has embroiled Western institutions such as Fortis, AIG and Societe Generale (SOGN.PA). The three firms all own Chinese fund ventures.

China's banking watchdog has toughened guidance on banks' capital adequacy requirements, while the country's insurance regulator has also stepped up monitoring insurers' repayment abilities.

The CSRC move came after Hua An Fund Management Co said last month that the operation of its overseas investment fund was seriously affected by the collapse of Hua An's business partner, Lehman Brothers Holdings Inc LEHPMQ.PK.

(Editing by Ken Wills)