China unveils first top-level roadmap for private funds to boost innovation, curb risks

China has rolled out its first top-level roadmap for the high-quality development of the private fund sector, underscoring the country's focus on addressing risks in the industry while enhancing its role in supporting technological innovation.

The guideline, released by the State Council on Friday, sets out a comprehensive framework to strengthen regulation, prevent financial risks and promote the high-quality development of privately offered funds, while establishing a cross-departmental governance mechanism.

People familiar with the matter said the document serves as the cornerstone of China's "1+N+X" regulatory framework for the sector. It is designed to better channel private capital toward early-stage and technology-focused enterprises while addressing issues such as illegal fundraising, fund misappropriation, corruption, unauthorized cross-border capital flows and other violations.

Under the guideline, authorities will optimize registration rules for private funds, preventing institutions and products that do not meet the characteristics and operational requirements of private funds from entering the market.

Efforts will be taken to promote the orderly exit of non-compliant entities and funds that fail to meet registration requirements.

The guideline also calls for strict control over the establishment of new government investment funds. In principle, counties and districts will not be allowed to set up new funds. Where the establishment of a new fund is deemed necessary, approval must be obtained from the higher-level government.

Any excessive creation of investment funds by State-owned enterprises will also be curbed, while restructuring of underperforming funds will be encouraged.

The document also calls for stricter oversight of private securities funds and stronger supervision of their trading activities.

To implement the guideline, the China Securities Regulatory Commission said it will accelerate the development of a broader regulatory framework for the sector, including revisions to the Securities Investment Fund Law and the introduction of judicial guidance for handling private fund-related crimes.

China's private investment fund industry manages about 23 trillion yuan ($3.4 trillion) in assets, accounting for roughly 15 percent of the country's asset management market and ranking second globally.