China to tighten oversight of private investment funds
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A Chinese flag flutters outside the China Securities Regulatory Commission (CSRC) building on the Financial Street in Beijing, China February 8, 2024. REUTERS/Florence Lo
BEIJING/SHANGHAI, June 5 (Reuters) - China on Friday tightened oversight of the country's 23 trillion yuan ($3.40 trillion) private fund industry, in a bid to reduce financial risks and channel money into technology innovation and emerging industries.
China's securities regulator said it would raise the bar for private fund registration, crack down on illegal fund activities and encourage long-term "patient" capital to support tech-focused venture capital investments.
"Strengthening oversight of private funds will help remove bad actors, create a sound environment for the industry ...and protect investors," the China Securities Regulatory Commission (CSRC) said in a statement.
The announcement came two weeks after China launched a major crackdown on cross-border investment and tightened capital controls. It's also part of Beijing's broader campaign to direct resources into the tech sector, which is key in the Sino-U.S. power rivalry.
The latest move represents a deepening of clean-up efforts that started in 2023 that saw the de-registration of more than 5,000 private fund managers. Chinese private funds can invest in securities or make private equity investments.
"The industry is big, but not strong. Funding structure is imbalanced. And some funds have even become the tools for criminals," the CSRC said.
According to the latest rules, regulators will set up a cross-agency monitoring platform to identify risks and misbehaviours. The watchdog will also step up monitoring of operation by government-backed funds.
The CSRC said it will clamp down hard on illegal activities including illegitimate cross-border flows, illicit fundraising and misappropriation of money.
($1 = 6.7671 Chinese yuan renminbi)
(Reporting by Beijing and Shanghai Newsroom; Editing by Ros Russell)
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