-CSRC is working on draft rules to tame FMC subsidiary growth
-A limited grace period has been incorporated into the draft
-We believe the final rules will be enforced shortly

Update: CSRC’s FMC subsidiary draft rules have been reported. The regulator appears to be making a concerted move to tame loan and channel business being conducted by fund management companies via their subsidiaries. There has been a lot of speculation in the past 48 hours due to the news. As it stands, most FMC subsidiaries would not meet the proposed capital requirements. However, this is only one facet of what is a broader structural realignment of the industry that will affect future product types and business lines. Foreign firms need to engage their domestic JV partners to ascertain where they stand in light of these proposed reforms but, more importantly, decide what will be required from the JV relationship in the immediate future.

These two sets of draft rules send a very clear message of CSRC’s intentions. We will be paying particular attention to…