China tightens its grip on the $9.3 trillion stock industry: report

China's top securities regulator vowed on Monday to crack down on mismanaged private funds and weed out bogus ones, as the government becomes increasingly assertive with the 60 trillion yuan ($9.28 trillion) industry.

China aims to channel more household savings into capital markets to finance innovation and promote economic recovery, while reducing the economy's reliance on bank lending.

Fund managers should align their interests more closely with investors and refrain from spinning off their products, Yi Huiman, chairman of the China Securities Regulatory Commission said.

" China is actively promoting quality growth in its capital markets, and the healthy development of the 60 trillion yuan fund industry is an important part of that," Yi said at a meeting hosted by the China Asset Management Association.

Chinese mutual fund managers are also facing increasing competition from global asset managers such as BlackRock and Fidelity International, after regulators scrapped foreign ownership in the sector on April 1, 2020.

By the end of July, the country's mutual funds stood at RM23.5 trillion, up 1.6 times from the end of 2016, Yi said.

The private equity funds sector doubled to RM5.5 trillion, while its private equity and venture capital sector tripled to RM12.6 trillion over the period.

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Despite the recent clean-up of China's private fund industry, there are still many small and weak players hampering quality growth in the sector, Yi said, adding that regulators will publish new rules in due course.

He added that some private fund managers even collect money publicly and misappropriate client funds.

Yee urged fund managers to prioritise clients' needs and interests as "it happens from time to time that funds make money while investors do not".

He asked managers to address the problem of churn, where fund sellers, seeking higher commissions, encourage investors to redeem existing funds and sign up for newly launched funds, resulting in huge flows of funds.