CHINA’S first, long-awaited law on investment funds will bar foreign partners of joint venture asset management companies from trading domestic A shares directly, official newspapers said Saturday.

　Joint venture funds would be able to sell units to domestic investors and invest in China’s US$500 billion A-share markets, but their foreign partners would be barred from the yuan-denominated markets like all foreign investors, the newspaper reports showed.

　The ban was within market expectations since China allows foreigners to trade only hard currency B shares, capitalized at a mere US$13 billion.

　“In line with China’s commitments to join the World Trade Organization to allow foreigners to participate in fund management firms, foreign companies can invest in fund management companies,” the China Securities Journal said.

　“All investment activities of Sino-foreign joint venture fund management companies must be conducted by the firms themselves and foreign partners cannot directly trade A shares,” it said.

　The fund investment law has been three years in the drafting and was delivered to a parliament session Friday for debate, State newspapers said.

　The law would raise the minimum paid-in capital requirement for a fund management firm to 100 million yuan (US$12 million) from 10 million yuan. It would decree at least 80 percent of a fund must be invested according to prospectuses, they said.

　China allowed securities funds to be established for the first time in 1998 and the industry has blossomed from just five funds then to 59 managing about 100 billion yuan.

　Funds operate under provisional regulations as the law had been delayed by debate over whether it should cover venture capital and industrial investment funds, as well as securities investment funds.

　Only securities investment funds are included in the draft sent to the National People’s Congress, the Shanghai Securities News said.

　The law covered setting up and selling stock and bond mutual funds, clearance and settlement procedures, and activities of fund managers, accordiing to State newspapers.

　They gave no timeframe for implementation.

　Global fund managers are keen to get into China, with US$1 trillion in personal savings deposits and 1,200 listed companies.China issued rules in June allowing Sino-foreign funds, in line with its WTO commitments. Foreign investment is capped at 33 percent in these ventures, rising to 49 percent in three years.

　Officials have said they plan to allow foreigners to trade A shares eventually through a qualified foreign institutional investor (QFII) scheme, but have given no timetable. (SD-Agencies)