CHINA: Hedge Fund business to be opened to foreign invested entities

Thursday July 7 2016

The China Securities Regulatory Commission (CSRC) has announced that it will allow the Asset Management Association of China (AMAC) to detail new rules to allow foreign hedge fund managers to launch funds in the country.

The CSRC said that liberalising the regime for hedge funds will deepen the domestic capital markets by diversifying the pool of investors and introduce new asset management talent. This is part of the commitment the CSRC made during the US-China Strategic and Economic Dialogue in 2015.

Prior to the new policy, mutual fund managers were subject to a 49% foreign cap in China except for those set up under the Mainland and Hong Kong Closer Economic Partnership Arrangement. The 49% foreign ownership limit also applied in practice for private fund managers in China. The new policy lifts this foreign ownership limit, although there are still limitations on the scope of eligible entities and the permissible activities of these entities.

The CSRC said that foreign asset managers launching products in China will have to set up operations locally, raise capital locally, and invest in the domestic capital markets, without conducting cross-border transactions, the regulator said.

A foreign invested applicant will need to complete the registration forms online and submit the relevant supporting documents to the AMAC. AMAC will confirm the registration by publishing the basic information within the application on its website within 20 working days. Post-registration, a registered fund manager will be subject to the same business conduct rules and reporting obligations contained in the regulations governing all other private fund managers in China.

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