By LI Linxu

In its latest move to promote the healthy development of capital market, China has published a regulation on the supervision and administration of private investment funds.

The regulation, with 62 items in seven chapters, will take effect on September 1, 2023, according to a State Council decree.

As the country's first administrative regulation for private investment funds, it has drawn a regulation bottom line and strengthened the whole process regulation for the sector, such as clarifying the application scope, specifying the obligations and requirements of private fund managers and custodians, and regulating the fundraising and investment operation.

The regulation is conducive to further improving the system of rules and regulations on private investment funds, said an official representing the Ministry of Justice and the China Securities Regulatory Commission, adding that the healthy development of the private investment fund sector is encouraged.

The sector is also urged to leverage its role in serving the real economy and promoting sci-tech innovation.

A staff member in a sci-tech SMEs is testing electronic components in Hefei, Anhui province. (PHOTO: XINHUA)

Of particular note is that a separate chapter is devoted to venture capital funds. A series of preferential policies will be rolled out by relevant departments, so as to encourage such funds to invest in innovative high-tech start-ups.

For venture capital funds, the registration procedures will be simplified, differential supervision and administration will be applied, and the exit mechanism will be facilitated, according to the regulation.

In recent years, venture capital funds have played an important role in investing in early-stage, small and sci-tech enterprises, and become an important force in industrial innovation and upgrading, said the official, indicating that more policies and measures are on the road to support the development of venture capital funds.

Statistics show that as of May 2023, there were 22,000 private fund managers registered with the Asset Management Association of China, managing about 21 trillion RMB in 153,000 funds.