Chinese regulators have called on domestic and foreign fund managers to prioritise the launch of new equity funds in a bid to shore up confidence in the country’s ailing stock market, according to a report by Reuters.

The China Securities Regulatory Commission (CSRC) recently issued informal verbal guidance to several large asset managers, encouraging them to roll out equity products ahead of other investment vehicles such as bond funds. The move comes as Beijing steps up efforts to revive its equity markets, which have struggled under the weight of weak economic data and a prolonged property downturn.

China’s $3.8tn mutual fund industry has been hit hard by falling investor appetite for equities. Only 334 new equity funds were launched in 2023, a 22% decline from the previous year, while total proceeds dropped nearly 40% to $19bn.

One state-backed fund manager told Reuters that the CSRC had required them to launch at least four new equity funds before any new bond product, while a foreign fund manager confirmed receiving similar guidance without a fixed ratio.

The regulator has also accelerated approvals for equity-focused private funds over the past two months, even as new bond funds continue to dominate institutional demand.

The latest measure builds on a series of interventions aimed at supporting China’s markets, including cutting stamp duty on stock trading, slowing the pace of initial public offerings, and encouraging margin lending.

Despite these efforts, Chinese equities have lagged behind global peers, with the CSI300 index dropping 11% last year versus a 20% rise in global benchmarks, as weak corporate earnings and muted economic growth continue to weigh on sentiment.

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