On October 9, 2026, the China Securities Regulatory Commission (CSRC) released the Administrative Measures for the Operation of Publicly Offered Securities Investment Funds (Draft) (the “draft Operation Measures”) and its supporting rules, including the Provisions on Issues Concerning the Implementation of the Administrative Measures for the Operation of Publicly Offered Securities Investment Funds (Draft) (the “Implementation Provisions”) and the Standards for the Contents and Formats of Information Disclosure by Securities Investment Funds No. 6 – Contents and Formats of Fund Contracts (Draft). This is the first comprehensive revision of the draft Operation Measures since 2014 and is aimed at implementing the Action Plan for Promoting the High-Quality Development of Publicly Offered Funds (the “Action Plan”) that was released in May 2025.
This article provides a brief analysis of the key provisions in the draft Operation Measures and focuses on the core initiatives of the Action Plan.
I. Promoting the Development of Equity-Type Funds
1. Optimizing the Fund Set-up
The Action Plan sets out a target of significantly increasing the scale and share of equity-type investments by public funds to better enable the public fund industry to fulfill its intended function. Accordingly, Article 18 of the draft Operation Measures lowers the establishment threshold for equity and other non-fixed-income type funds from RMB 200 million (or 200 million units) to RMB 50 million (or 50 million units). In contrast, fixed-income-type funds, including bond funds, money market funds and interbank negotiable certificate of deposit funds, remain subject to the RMB 200 million (or 200 million units) threshold. These changes ease the requirements for launching equity-type products, helping to expand the supply of equity-type products and optimize the market’s product structure.
We note that Article 11 of the Action Plan proposes to further streamline the registration arrangements for equity-type funds: (1) equity exchange-traded open-ended index funds (ETFs) will be subject to expedited registration, with registration in principle to be completed within 5 business days from the acceptance of the application; (2) for actively managed equity-type funds or off-exchange mature broad-based stock index funds, registration shall in principle be completed within 10 business days from the acceptance of the application; and (3) for hybrid funds or bond funds with expressly stipulated minimum equity holding ratio requirements, registration shall in principle be completed within 15 business days from the acceptance of the application. However, the current draft only adds provisions in the Implementation Provisions allowing FOF funds and Hong Kong Mutual Recognition Funds to be registered via a simplified procedure (the review time not exceeding 20 business days in principle) but does not incorporate the expedited registration arrangements for equity-type funds.
2. Establishing a Floating Management Fee Mechanism
Article 1 of the Action Plan proposes establishing a floating management fee mechanism linked to fund performance. It promotes a floating management fee mechanism based on performance benchmarks for newly established actively managed equity-type funds.
Article 42 of the draft Operation Measures elevates the floating fee arrangements that already exist in practice to the level of departmental rules, clarifying that fund managers may adopt a non-fixed fee model. However, the draft Operation Measures also requires fund managers to: (1) design fair fee-charges that are aligned with investors’ interests; (2) take effective measures to avoid incentivizing portfolio managers to pursue undue risks when managing investment portfolios; and (3) strengthen fair trading controls among fund products with different fee models. The draft Operation Measures allows fund managers to establish separate share classes for personal pension products and fund investment advisory products, offering discounted management and custodian fees in accordance with the regulations.
Currently, regulators have guided leading fund managers to launch funds adopting the floating fee model according to the Action Plan, requiring that the number of such funds be no less than 60% of the number of actively managed equity-type funds launched by these fund managers, with a phased full-scale rollout to follow pending the regulator’s assessment.
II. Strengthening the Disciplinary Role of Performance Benchmarks
Article 2 of the Action Plan calls for “strengthening the disciplinary role of performance benchmarks”. To implement this policy objective, in January 2026, the CSRC and the Asset Management Association of China (AMAC) issued the Guidelines on Performance Benchmarks for Publicly Offered Securities Investment Funds and the Detailed Rules on the Operation of Performance Benchmarks for Publicly Offered Securities Investment Funds. In June 2026, AMAC further issued the Guidelines on Thematic Investment Style Management for Publicly Offered Securities Investment Funds.
For the first time, the draft Operation Measures sets out provisions on performance benchmarks at the departmental rule level. Article 36 of the draft Operation Measures provides that fund managers shall set performance benchmarks for their funds and establish full-process management for performance benchmarks, ensuring that such benchmarks effectively serve to represent the investment style, measure investment performance and constrain investment conduct.
Article 37 of the draft Operation Measures makes further provisions:
- First, where a fund’s name references a particular market capitalization, industry, theme, market segment, geographic region, strategy, asset class or other investment direction, the fund contract and prospectus shall clearly specify the investment direction indicated in the fund’s name in an identifiable or quantifiable manner. The scope so specified shall be consistent with general market understanding and common perception, directly relate to the investment direction and 80% or more of the fund’s total assets shall fall within the scope specified by such investment direction.
- Second, fund managers shall establish and maintain investment style pools in accordance with the applicable regulations and ensure that the securities held in these pools are consistent with the investment direction stipulated in the fund contract and prospectus.
- Third, where a fund’s name does not reference a specific industry or theme, the fund manager shall strengthen diversified investment management and not concentrate investments in a single industry or theme.
III. Enhancing the Operating Mechanisms for Public Funds
1. Enhancing Fund Survival Criteria and Exit Mechanisms
Article 16 of the Action Plan calls for enhancing the fund survival criteria and exit mechanisms for public funds. Article 47 of the draft Operation Measures links these survival criteria to the fund establishment thresholds, providing that where the net asset value of an open-ended fund or the number of its fund unit holders remains below the establishment threshold for 20 consecutive business days, the fund manager shall disclose this in the periodic reports; where such circumstances persist for 60 consecutive business days, the fund manager shall, within 10 business days, report to the corresponding dispatched office of the CSRC and propose solutions. This article also removes the special rule for sponsor-initiated funds that “mandatory liquidation shall be triggered if the fund’s scale falls below RMB 200 million after three years from establishment”, thereby aligning their exit arrangements with those of ordinary funds. The draft Operation Measures further provides that where a fund fails to meet the fund survival criteria for 60 consecutive business days, but the manager intends to continue its operation, the manager shall bear the fixed costs of fund operation itself.
The draft Operation Measures also mandates strengthened termination mechanisms, requiring fund managers to expressly stipulate in the fund contract that the fund contract shall terminate where the net asset value remains below a specified threshold for a continuous period. Fund managers may also stipulate other circumstances for the termination of the fund contract, by considering factors such as the number of fund unit holders and the concentration of fund unit holders.
2. Refining Product Classification Standards
Based on the requirements of the Action Plan, the draft Operation Measures further refines the standards for classifying funds. In terms of fund categories, interbank negotiable certificate of deposit funds, futures and derivatives funds, and real estate investment trust (REITs) funds have been added. In terms of operation methods, perpetual closed-ended funds have been introduced, standing alongside open-ended funds and fixed-term closed-ended funds. In terms of underlying assets, depositary receipts are now classified as equity assets, and asset-backed securities as bond assets, and it is clarified that the calculation of the 80% or more underlying asset ratio used to determine fund category shall uniformly use total fund assets as the denominator.
Article 7 of the draft Operation Measures further subdivides hybrid funds into three types: equity-biased hybrid funds, where the minimum equity asset investment ratio is 60% or above; bond-biased hybrid funds, where the maximum equity asset investment ratio is 30% or below; and other hybrid funds. However, for other hybrid funds, the range between the upper and lower limits of the maximum equity asset investment ratio shall not exceed 40%.
The further refinement of the product classification standards under the draft Operation Measures helps increase the supply of innovative products and optimize fund operations, thereby providing more diversified product choices for retail investors and medium- to long-term capital.
3. Clarifying the Exemption Arrangements for Index Funds
Index funds invest by tracking an index and do not aim to control listed companies, therefore their fund managers have limited discretion to actively adjust individual securities and their weightings. Applying the same rules on shareholding limits, short-swing trading and shareholding reduction to index funds as those applicable to actively managed products is inconsistent with the characteristics of the index funds and may impose unnecessary compliance costs on the market participants. Accordingly, the draft Operation Measures introduces refinements to the relevant rules specifically for index funds.
Article 44 of the draft Operation Measures provides that, for funds investing in securities entirely in accordance with the constituent proportions of the relevant index:
1) where the fund holds 5% or more but less than 20% of the voting shares issued by a listed company, it is exempt from the large shareholding disclosure and “slow walk” restrictions (i.e., the suspension of trading following a 5% disclosure) under Article 63 of the Securities Law;
2) where the fund’s holding in a listed company reaches 5%, it is exempt from the short-swing profit disgorgement rule under Article 44 of the Securities Law; and
3) where the fund sells listed company shares held by it that are not within the restricted transfer period prescribed by laws, administrative regulations or CSRC rules, the relevant provisions of the Interim Measures for the Administration of Shareholding Reduction by Shareholders of Listed Companies shall not apply, unless the CSRC otherwise provides.
Article 7 of the Implementation Provisions also provides that fund products investing strictly in accordance with the constituent proportions of the relevant index are exempt from the double 10% investment ratio limits1. For enhanced index funds and index funds using a sampling replication method, the portion replicating the index is also exempt from the ratio limit that “the market value of securities issued by a single company held by one fund shall not exceed 10% of the fund’s net asset value”, provided that the relevant securities do not exceed their respective proportions among the index constituents.
1. The “dual 10%” investment proportion limits refer to: (1) the market value of securities issued by a single company held by one fund shall not exceed 10% of the fund’s net asset value; and (2) the securities issued by a single company held by all funds managed by the same fund manager shall not exceed 10% of the securities issued by that company.
