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US funds industry seeks China reform

The Investment Company Institute is lobbying the US Congress to push for more access to ChinaÆs mutual funds business.
The Washington, DC-based Investment Company Institute, the lobby group for AmericaÆs mutual funds industry, has requested the United States Congress to push for greater openings in ChinaÆs funds activity.

Paul Schott Stevens, president and CEO at ICI, last week went before the Committee on Financial Services in the US House of Representatives, which is chaired by Barney Frank of Massachusetts (Democrat).

The committee is holding hearings examining US interests in the reform of ChinaÆs financial services sector in counterpoint to the US-China Strategic Economic Dialogue, high-level exchanges between Hank Paulson, US Treasury secretary, and Wu Yi, vice premier and minister of finance of China.

The ICI represents 8,781 mutual fund companies, as well as 665 closed-end funds, 428 exchange-traded funds and four sponsors of unit investment trusts. ICI fund members have total assets of around $10.9 trillion, representing 98% of all assets of US mutual funds.

Although Stevens says the ICI welcomes the strategic economic dialogue, any results have been ôincrementalö. He says the further opening of ChinaÆs financial markets will help both American and Chinese investors, who can diversify by investing in one anotherÆs markets, and give Chinese people access to retirement savings vehicles in the US as well as increase competition and advance global best practices.

Specifically, the ICI wants Congress to call on China to raise the ceiling on foreign ownership of Chinese asset management firms to allow foreign entities to take a majority stake; to liberalise the rules on foreign portfolio investment in Chinese markets, building on ChinaÆs recent decision to expand qualified foreign institutional investment from $10 billion to $30 billion; and to further ease restrictions on local portfolio content to encourage more international investment.

This is not the first time the ICI has prodded Beijing to open to US mutual funds. In October, 2003, it sent a letter to the China Securities Regulatory Commission and the State Administration of Foreign Exchange, commending China for having introduced its QFII regime. The ICI suggested QFII should be transitional and ultimately abolished, arguing that mutual fund money was not æhotÆ but stable.

At that time, the ICI made several suggestions, including easing QFII percentage limits of Chinese stocks; abolish minimum investment amounts to receive or keep QFII quotas; base qualification on aspects other than fund manager size; introduce more transparency in the licensing process; allow QFIIs to use multiple domestic securities brokers; and reduce the volume of documents that must be translated into Chinese.
¬ Haymarket Media Limited. All rights reserved.
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