Chinese authorities have introduced rules to rein in risks to the country's market funds sector, including unveiling a rule to limit instant redemption of withdrawals from money market funds.
The China Securities Regulatory Commission and the People's Bank of China said June 1 that effective immediately, same-day withdrawals for individual investors are capped at 10,000 yuan from a single money market fund. However, there is no daily limit imposed on overnight redemptions.
Further, other than commercial banks that are qualified to engage in fund sales, other individuals and institutions are not allowed to provide advances to investors ahead of redemptions. The regulators also warned that companies need to avoid misleading investors on risks involved.
The move is aimed at curbing the aggressive business expansion of fund managers and fund sales agencies through promoting instant withdrawals and creating a false sense of unlimited liquidity among investors, which could trigger systemic instability.
The regulators did not name any companies in their statement, though Ant Financial Services Group in May had moved to lower the same-day withdrawal amount for its Yu'E Bao money market fund to 10,000 yuan per investor from 50,000 yuan, starting June 6. The Alibaba Group Holding Ltd. affiliate's fund has 14% of the total assets of the mutual fund industry, according to Moody's.
As of June 1, US$1 was equivalent to 6.42 Chinese yuan.
