Changes Made to Chinese Joint Venture Proposal Reflect Institute Comments

Washington, DC, June 21, 2002 - Final rules recently adopted by the China Securities Regulatory Commission (CSRC) regarding foreign firms’ participation in the Chinese fund management industry reflect several recommendations made by the Institute in a January comment letter.

The final rules include a modified disqualification provision which sets forth the requirements under which foreign firms will be able to acquire an interest in, or establish a joint venture with, a Chinese fund management company. The final rules clarify that a foreign firm will not be disqualified from participating in China’s fund management industry on the basis of any minor or technical regulatory infractions. The disqualification provision also does not include a proposed requirement that foreign regulators certify that firms have not committed any material illegal activities within a three-year period. A proposed requirement that foreign firms be located in a country with which the CSRC has a memorandum of understanding on cooperation in securities regulation was adopted.

Under the World Trade Organization (WTO) accession agreement, foreign firms will be able to own up to 33 percent of a Chinese asset management firm upon China’s accession into the WTO and up to 49 percent of an asset manager within three years thereafter. China acceded to the WTO on December 11, 2001.