New rules ‘force 10,000 Chinese wealth managers to close’: Reports
A crackdown on firms selling investments to retail investors in China that began in early February has seen around 10,000 of these types of businesses being shut down, the South China Morning Post, Wall Street Journal and other media outlets are reporting.
The reports are based on a statement published yesterday on the website of the Asset Management Association of China (AMAC), which on Tuesday could not immediately be accessed by International Investment due to what appeared to be technical problems.
The types of businesses that had been forced to close by having their licences removed included the Chinese equivalents of hedge funds and private equity funds, the reports noted.
The crackdown had been instigated in response to problems with bad investments which were seen as resulting from the inadequate regulation of China’s investment management industry.
The AMAC is an industry organisation that is supervised by China’s securities regulator.
On its website, the AMAC said it many of the companies that had been shut down had been found to “[lack] basic infrastructure or funding, while others were engaged in private lending, rather than their core business,” the Wall Street Journal‘s report noted. “Some were engaged in illegal fundraising and criminal activities.”
The crackdown began after the AMAC issued a set of new rules on 5 Feb, which required Chinese asset managers to begin “to submit legal opinion documents, and records of the products they have issued”, the South China Morning Post story noted.
Currently there are more than 16,000 registered fund firms left, which are looking after investments totaling about 6.5trn yuan (nearly US$980bn), the WSJ report noted, citing the AMAC statement.
Market observers saw the crackdown on mainland firms as potentially good news, at least in the short term, for Hong Kong-based wealth managers, which they say could already be benefiting from the large number of Mainland Chinese investors who will suddenly be in need of a trustworthy place to stash their savings.