Challenges from WTO Membership
Advances in Chinese Economic Studies series
Edited by Kam C. Chan, Hung-Gay Fung and Qingfeng ‘Wilson’ Liu
Chapter 10: A Primer on the Securities Investment Fund Industry in China
Xiaoqing Xu INTRODUCTION China’s emerging securities investment fund (SIF) sector represents one of the fastest growing fund markets in the world. In 1999, China only had ten fund management companies (FMCs) and an industry asset base of RMB51 billion (or US$6 billion), accounting for 6 percent of China’s tradable stock market value (see Table 10.1). By the end of 2005, 52 FMCs had set up 218 funds with an asset base of RMB471 billion (or US$59 billion), accounting for 44 percent of the country’s tradable stock market value. In addition, China’s fund industry has attracted capital and talents from many of the world’s leading fund managers. By the end of 2005, 20 joint venture (JV) FMCs had been set up by leading international asset management ﬁrms and Chinese domestic ﬁnancial institutions. Securities investment fund, an investment intermediary that gathers funds from investors and collectively invests in a portfolio of publiclytraded stocks and bonds, is a natural byproduct of the security market development. Through the collective investments of the SIF, each investor shares in the return from the fund’s portfolio while beneﬁting from professional investment management, risk diversiﬁcation and enhanced liquidity. There are two major types of SIFs: closed-end funds (listed and traded on the stock exchange with a ﬁxed number of shares) and open-end funds (unlisted shares open to investors for purchase or redemption at Net Asset Value). Closed-end funds raise the capital for security investments through an IPO, while open-end funds (also called ‘mutual funds’)...
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