Earlier this year, Wu Qing, Chairman of the China Securities Regulatory Commission, had said that a preliminary reform plan has been formed to boost medium- and long-term capital’ entry into the stock market.
Industry insiders say that a draft plan for public fund reform has been largely formed, currently under refinement, and the plan will later be officially released by the CSRC for public consultation.
It includes new regulations across six major areas: the fund assessment mechanism, fee rate reform, equity products, compliance, distribution, and corporate culture development, they say.
The most important reform is on the public fund assessment mechanism, particularly the establishment of a long-cycle evaluation system. For senior management, the weight of evaluation of scale, rankings, income, and profit will be lowered, while the weight of fund performance will account for no less than 50%. For fund managers, the weight of performance for periods of three years or more will be no less than 80%, and for five years or more, it will be no less than 50%.
The plan proposes the reform of fund company classification evaluation indicators, which will include metrics such as the proportion of profitable clients, comparison with performance benchmarks, the proportion of equity products, and the evaluation of investment and research capabilities. The score for self-purchasing equity products, investment behavior stability, and equity scale growth can be increased to up to 50%, and the indicators for the ability to serve investors will not be less than 80%.
The plan proposes reforms that emphasize long-term performance, with awards focused on performance over five years or more.
To address the issue of “fund companies making money, but investors not,” the plan includes salary reforms. For funds with returns below the performance benchmark or negative returns, fund managers’ salaries will be reduced, and performance-based pay will be deferred and subject to clawback mechanisms.
The plan also emphasizes strengthening the public fund fee reform, including linking fund performance with fee rates, enhancing the constraints of performance benchmarks, and lowering the fee rates for large-scale broad-based index products.
To make the public fund industry a booster for the entry of incremental funds into the market, Wu Qing stated during this year’s two sessions that the registration and issuance of public funds had significantly accelerated, with equity ETFs exceeding 3 trillion yuan in scale. The public funds held in A-shares grew from 5.1 trillion yuan at the beginning of 2024 to 6 trillion yuan, an increase of 17.4%.
Regarding the weak issuance of equity products, the plan mentions increasing the proportion of equity products and promoting the issuance of equity funds. For equity product innovation, the plan provides strong support for two types of products: “low fee + absolute returns + performance-based rewards” and “long-term stock investment + regular dividends.”
In addition, pilot floating management fees will be standardized. In August 2023, the first batch of floating fee rate products linked to fund size, performance, and investor holding period were approved, and by the fourth quarter, 20 floating fee rate funds were launched. As of March 14, 2025, there are 147 public funds with floating management fees.
The plan also includes optimizing the registration and issuance of equity products, with stock ETFs completing registration within five days; actively managed equity and mature broad-based index products completing registration within ten days; and products with a certain proportion of stock positions, such as secondary bond funds and mixed funds, completing registration within 15 days.
Regarding compliance management, the plan calls for establishing a counter-cyclical adjustment mechanism and strengthening supervision of short-term behaviors such as “race-to-the-bottom” competition. It also seeks to limit the number and size of funds managed by individual fund managers and to criminalize violations such as “pseudo-market capitalization management.”
To cultivate first-class investment institutions, the plan encourages the transformation of leading fund companies into wealth management institutions and supports mergers and acquisitions in the fund industry. Public funds are encouraged to enhance their investor service capabilities, expand the range of investable public funds for social security, annuities, and pensions, and increase the proportion of equity investments.