Treasury Today on Chinese MMF Regs
Treasury Today released an article entitled, "New rules for China's budding MMFs." It reads, "After a year of rip-roaring growth, change will soon be afoot in China's nascent money market fund (MMF) industry as new rules are introduced that promise to bring the regulation of MMFs closer in line with international standards. From February 2016, Chinese MMFs will be subject to a package of new requirements that should go some way to addressing concerns about risks that have been developing in the industry in the wake of the recent inflows. In a report published last week entitled "New Chinese Money Fund Rules Move Closer to International Standards," Fitch Ratings explained that the rules announced by the China Securities Regulatory Commission (CSRC) cover areas including investment scope, liquidity rules, NAV deviation and maturity limits. (See our Jan. 20 News, "Ignites: MMF Fee Waivers Drop in 2015; Fitch on MMF Reform in China.") The Treasury Today piece continues, "Last year we saw a huge growth in MMF investment in China, partly driven by institutional investors," says KL Cheah, Head of Global Liquidity Sales, Greater China, JPMorgan Chase Bank (China). "We are seeing a growing popularity in MMFs across the board as retail clients gain easier access to these investments, increasing popularity in MNCs using it as a cash management option and institutional funds flowing more readily into the product as well. This is happening at a time when we have regulatory development of the overall MMF industry in China that make it more investable and more comparable to the AAA rated funds market." Others industry experts agree on this assessment of the market. "We are seeing that more and more corporates that traditionally would have put their money in the bank are now beginning to accept MMFs as one of their investment options," says Li Huang [of] Fitch Ratings. Treasurers in China are beginning to warm to such investments for largely the same reasons as their international peers." It continues, "Further regulatory measures will therefore be required from the CSRC before the industry becomes fully in line with international standards. But even if such reforms are not forthcoming in the near future, a growing range of investment options aligned with MNC investment policies could still be on the cards in the near future. For all the growing popularity of MMFs amongst corporates as an alternative to bank deposits, the number of funds that meet investment policy criteria remain limited. As of the end of 2015, there were 263 MMFs in China with total assets of $4.6trn. Only five of these funds were AAA rated however.... "The regulation is moving in the right direction and the industry is in a growth phase," Cheah adds. "This is a trend that we see continuing.""
