China's long-expected Securities Investment Fund Law is likely to come out within the year. It will be the country's first law on the fund industry, which is expanding rapidly and on the verge of opening up.

The draft, after being amended a dozen times, is likely to be finalized soon and submitted to the Standing Committee of the National People's Congress (NPC), China's highest legislative body, for a review during its August meeting, according to Wang Lianzhou, who has headed the drafting panel of the fund law since 1999.

The law will cover securities investment funds only, and will be applicable to both domestic and foreign companies.

The draft has defined the threshold, business scale and responsibility of the fund managers and custodians, and includes a civil compensation framework, said Wang.

The Standing Committee is expected to discuss the draft law over two or three times. If no major disagreement occurs, the bill may be passed in December.

"We have been pushing hard so that the bill can be approved within the service term of the Ninth NPC," said Wang.

But the legislative process has not been smooth for the fund law. At first, it was named the Investment Fund Law, expected to cover all kinds of investment funds in China, including securities investment funds, venture capital funds and industry funds.

The first type of fund is now regulated by the China Securities Regulatory Commission (CSRC), while the second and third are under supervision of the State Development and Planning Commission (SDPC).

After negotiations between relative departments, the draft was confined to securities investment funds only. Other types of investment funds will be regulated by administrative rules, said Wang.

The SDPC is expected to come up with rules specially designed for industry funds. And CSRC would also draft regulations concerning privately-collected funds used for securities investments.

(China Daily July 12, 2002)