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August 31, 2021

Chinese regulators looking to rein in private equity funds

By Johney Amala

The China Securities Regulatory Commission (CSRC) is reportedly looking to tighten scrutiny on the country’s private equity and venture capital funds and oust the fake ones.

The latest development comes as the Chinese government moves to tighten its regulations for the $9.3 trillion fund industry.

China Securities Regulatory Commission Yi Huiman said that the country’s top securities regulator will work to weed out the fake private equity funds that are being sold to common people instead of targeted investors.

The CSRC also plans to rein in money managers that illegally take public deposits, provide loans or embezzle fund assets.

“China is actively promoting high-quality growth of its capital markets, and healthy development of the CNY 60trn yuan industry is a crucial part of it,” Yi was quoted by Bloomberg as saying in a meeting held by the Asset Management Association of China.

China’s financial regulators have been strengthening its control over areas including lending, insurance, initial public offerings, and margin financing.

China paused private funds from raising money to invest in residential property developments as part of its increased oversight of the private equity industry.

The regulatory has been focusing on issues including compliance, liquidity risks, and illegal fund raising as part of its efforts to crack down on irregularities among private funds.

It included the annual inspection of hundreds of private equity players between 2016 and 2019.

The CSRC’s probe of 497 private funds in 2019 brought in light malpractices such as raising money from disqualified investors, promising guaranteed returns and repaying existing investors by taking in new money.

Recently, American asset manager Blackrock started selling its own mutual fund in China through a regional subsidiary in a bid to tap the $3.6trn country’s retail fund market.

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