China’s securities regulator announced a long-expected restructuring on Friday, which will entail the creation of four new departments and the merger of eight existing ones into four.

The new departments at the China Securities Regulatory Commission (CSRC) are: bond investment; innovative businesses; private funds; and a division to combat illegal securities and futures trading.

Meanwhile, the two units for listed companies supervision have been merged, as have the two for futures supervision, as well as the fund and intermediary supervision divisions and the departments for public offering and growth enterprise board offering supervision.

The number of departments remains the same, as does the relationship between them. The move is simply an integration of internal resources, says a CSRC spokesperson.

The regulator does not give a specific timeline for completion of the restructuring, saying only that it will further define the responsibility for each department, as well as staff allocation, “as soon as possible”.

A restructuring at the CSRC has been expected for some time, given the significant changes to the country’s asset management industry in recent years.

For example, private funds are allowed to engage in mutual fund business under the revised investment securities fund rules that came into effect last June. This brought private sunshine funds – China’s equivalent of hedge funds – under the CSRC’s purview.

Business innovation among fund houses is another area the regulator wants to keep a close eye on. The number and size of new types of products is growing fast as the country liberalises its asset management industry.

One notable example is the emergence of internet finance products, whereby asset managers partner third-party payment providers to attract investors’ idle cash into funds. Yu’e Bao, a money market fund attached to payment provider Alipay, has attracted flows of Rmb250 billion ($41 billion) since its launch last June.

As their assets grow, such innovations are raising concerns about whether they are well regulated.  

“[The restructure] is paving the way for the CSRC to push for further reform of the capital markets, as well as of the securities and investment industry,” says Zhang Howhow, research director at Shanghai-based consultancy Z-Ben Advisors. “The CSRC looks poised to take a firmer hand with any malpractice in the market.”

With regard to the China-Hong Kong mutual recognition agreement for funds, the CSRC spokesperson has been quoted as saying the preparatory work has been done and is waiting for formal approval from the State Council. Once it gets the green light, the regulator will work with Hong Kong’s Securities and Futures Commission to kick off the programme.