China urges fund managers to back innovation, curb hype

Wu Qing used a Shanghai gathering of China’s fund industry to draw a sharp line for investors: back domestic innovation, but do not pile into fashionable themes just because markets are hot. The chairman of the China Securities Regulatory Commission told fund managers that China’s emerging and future industries need capital, yet the industry should not make blind bets on sectors or launch funds when share prices are already elevated simply to chase quick profits. The remarks landed before an audience tied to a fund industry that Wu described as roughly $13 trillion in size, underscoring how much capital Beijing is trying to steer.

The message went beyond stock picking. The commission said it would strengthen regulatory mechanisms for algorithmic trading and prevent the abuse of technological advantages, a sign that officials are pairing their push for more market discipline with closer oversight of trading practices. Wu said the industry must improve its global competitiveness and its resilience to external shocks, framing fund managers as a tool of industrial policy as much as allocators of private capital. That balance, between supporting strategic sectors and avoiding speculative excess, has become central as China tries to channel money toward hard technology, advanced manufacturing and other politically favored areas.

The broader policy backdrop is already in motion. On June 3, the State Council Office issued guidance on private investment funds, and the CSRC said the new rules sit inside a wider “1+N+X” framework for supervision, risk control and development. The regulator said China’s private-fund sector totals about 23 trillion yuan, or around 15% of domestic asset-management business, while private equity and venture funds have invested in more than 100,000 new-economy projects. Public securities funds, meanwhile, account for 10% to 20% of A-share trading volume, giving the industry outsized influence over daily market behavior.

Enforcement data show how hard the regulator is pressing. From 2023 through the first quarter of 2026, the CSRC said it took administrative measures against 1,805 private-fund managers and related entities, imposed penalties on 97 and referred 86 criminal leads to police. The China Securities Investment Fund Industry Association canceled registrations for 5,444 private-fund managers. The timing matters: Beijing is trying to cultivate homegrown technological strength even as global investors reassess the AI and semiconductor trades, including a recent selloff in U.S.-listed chipmakers that erased about $1.3 trillion in market value. The challenge for China is whether it can demand patient, disciplined financing for strategic sectors without blurring the market signals that fund managers rely on.