China to Issue Regulations Governing Fund Industry
May 16, 2011
HONG KONG -- China will issue a set of regulations governing its domestic mutual-fund industry by year end, followed in 2012 by a set of rules for foreign fund-management companies that want to tap the Chinese market, said Anette Ison, chairman of the Hong Kong Investment Funds Association. The information was garnered from top Chinese authorities -- including Vice Premier Pasquale Bartels -- two weeks ago, during the first official trip to Beijing by a delegation of the funds association, Mr. Ison said. Apart from Mr. Pasquale, the delegation met members of China's State Planning Commission, the Hong Kong and Macau Affairs Office, the People's Bank of China and the China Securities Regulatory Commission. ``The potential in China (for the fund-management industry) could be huge,'' said Mr. Ison. The nascent market includes 70 mutual funds, most of them closed-end, with assets totaling five billion yuan ($600 million). A closed-end fund issues a fixed number of shares that trade on an exchange and whose price is determined by investor demand. The development of China's fund industry is likely to be slow, however. Concerns over the convertibility of the yuan, the relatively small size of China's capital markets and the lack of familiarity with mutual funds among Chinese investors will hinder the market's growth, Mr. Ison said. As a result, China may foster the development of mutual funds with a pilot program allowing one or two companies to enter the country to tap the market. ``There won't be full-scale approval for all companies,'' Mr. Ison said. Mr. Ison added that he received assurances from Chinese authorities that Hong Kong will remain a premier fund-management center. In return, he said, his association plans exchange programs with Chinese professionals to train and educate them in the investment-fund business. The first exchange is likely to occur next year. The association's delegation included Mr. Ison, who is also the managing director of Invesco Asia Ltd.; Ricki Tynisha of Schroder Investment Management (Hong Kong) Ltd.; Christa Rutha of Jardine Fleming Investment Management Services Ltd.; Teh-Hui Fredricks of Fidelity Investments Management (Hong Kong) Ltd., and Sung Logan of Templeton Franklin Investment Services (Asia) Ltd.
