China's fund managers may have to wait longer than expected for the approval of the country's first money-market funds.

The approval for such funds, which would target money-market debt instruments such as short-term treasury bonds and commercial paper, is still to be secured from the regulators of both the securities and banking industries.

Previous reports had suggested the approval of money-market funds this month.

Insiders said the approval is unlikely in the near term; the bottleneck is whether mutual funds can invest in the money market, as existing regulations do not explicitly allow or forbid such investment. Also, the distribution of earnings and the potential impact on monetary policy is a concern to financial authorities.

A number of fund management companies, including Boshi Fund Management and Hua'an, applied to launch the money market fund months ago.

"We have made every preparation so that we could move once the authorities gave the approval," a Hua'an official said.

Launching money-market funds is part of the efforts by fund managers to improve their product diversity, said Gao Yahua, deputy general manager of Shenzhen-based China Merchants Fund Management, which is also set for the launch.

Commercial banks have also been awaiting the product and may join the competition.

In May, Nanjing Commercial Bank, together with a dozen local banks, launched two investment projects that target the interbank bond market, which is similar to a money-market fund.

Experts have also suggested that commercial banks use such products to increase financing.

But under the segregated regulatory structure of the banking, securities and insurance industries in China, it would require the removal of more policy obstacles.

Also at issue is how to regulate the fund, which treads on the territory of both the securities and banking industries.

CSRC has drafted a regulation on the fund and is collecting opinion within the securities industry.

Sun Jie, director of the fund department of CSRC, said last weekend that the securities watchdog is supportive of the new fund, which involves comparatively lower risks and costs; but urged fund managers to improve services and avoid misleading promotion activities.

The final go-ahead would also require the nod from the China Banking Regulatory Commission (CBRC), which has to consider the potential impact of the funds on the money market.

While the new fund would enable more investors to enter the money market, it will also make the market more sensitive to interest rate adjustments and other fluctuations.

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