CSRC to regulate Chinese PE, NDRC to promote it – State Council

"The CSRC should be responsible for protecting investors' interests...Two departments have to share information and coordinate," according to a statement approved by the State Council. "Private equity industry development has gathered pace in recent years, supporting the growth of small- and medium-sized enterprises. However, who should regulate it is still unclear. Uncertainty isn't helpful for the industry."

The tug of war between the CSRC and NDRC broke out into the open at the end of last year, when China included private equity in the draft Securities Investment Funds (SIF) Law. This opened the door for the CSRC to play a regulatory role alongside the NDRC.

Although fierce lobbying saw specific references to the asset class removed, the CSRC was awarded jurisdiction over "sunshine funds" - capital raised from private sources to invest in listed stocks. This implied that the NDRC would retain responsibility for non-public investment funds, while the CSRC oversaw public market activity.

The securities regulator subsequently issued its own draft guidelines for sunshine funds and went so far as to invite PE firms to raise mutual funds. The NDRC nixed the plan, reminding private equity managers they are prohibited from running retail funds and investing in publicly traded securities.

When the SIF Law came into effect on June 1, it still wasn't clear who was regulating what, much to the concern of industry participants.

Interestingly, Liu Jianjun, a senior official at the NDRC whose remit included private equity, was appointed to a leading role within the CSRC's fund department in May. A source familiar with the situation told AVCJ that the State Council is aware of the regulatory tension and is trying to coordinate a mutually acceptable solution.

Liu's appointment appears to be part of these efforts.

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• Topics
• Greater China
• Renminbi fund
• Regulation
• China
• RMB fund
• regulation
• NDRC
• CSRC