CSRC Chooses First Open-Ended Mutual Fund Manager

Caroline Maxwell, InvestorsOffshore.com

27 March 2001

In a move which is seen by many to underscore the Chinese mutual funds industry's commitment to reform, the China Securities Regulatory Committee announced recently that the Shanghai based Hua'an Fund Management Company has been chosen to manage the country's first open-ended mutual fund.

A spokesman for the CSRC said that the company had been selected on the basis of an appraisal by overseas experts, and an assessment by the Committee of their progress following a nation-wide anti-corruption drive ordered by regulators after unsavoury revelations about share price manipulation within the industry.

The drive was instigated following a report on corruption published in Caijing magazine. In a statement issued at the weekend, the CSRC revealed that a total of thirty executives from China's top fund management companies had been sacked as a result of the probe, and said that it was considering taking legal action against executives from the Boshi fund management company- the report apparently uncovered more than 10,000 instances of 'abnormal trades' on the company's books!

The disclosures prompted a split among policy makers, with some of the opinion that liberalisation of the markets should be delayed until corruption in the fledgling funds management industry was completely under control, but the hard line taken by the CSRC seems to be taking effect. Industry sources have hinted at a mid-year launch for the country's first ever open-ended mutual fund. Sun Jian, Hua'an's compliance officer in Shanghai, has high hopes for the fund, and stated the widely held belief that: 'The new open-ended funds will be big improvements from the current closed-end funds. The compliance rules are more stringent, [and] the standards on performance, transparency and investor protection are all higher.'

However, as China prepares to join the World Trade Organisation, Hu'an cannot afford to rest on its laurels- the CSRC also instructed other firms to carry out studies with a view to transforming existing closed-end funds into open-ended funds, and companies such as Fullgoal Fund Management, and Nan Fang Fund Management Co. are said to be nipping at Hu'an's heels.

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