The directive, which will take effect on May 1, stipulates that these joint venture firms must seek SAFE approval to borrow overseas or write guarantees for overseas institutions and they must secure written consent from SAFE to open forex capital accounts, the Securities Times reported yesterday.

Further, these joint venture firms may only accept investment funds from overseas partners through approved forex capital accounts, which are to be opened at designated banks, while international payments are to be made under trade-based current accounts, unless otherwise specified by SAFE.

To meet the country's World Trade Organization (WTO) commitments, the China Securities Regulatory Commission issued rules governing the establishment of joint venture fund management companies in June last year, to establish a mechanism for those firms to enter the burgeoning sector.

Under the WTO, China's current ceiling for foreign investment is set at 33 per cent and is scheduled to rise to 49 per cent no later than the end of 2004.

Such joint ventures have the same business scope as their solely Chinese-funded counterparts and are subject to the same regulations, the commission has said.

The past two months witnessed the launch of China's first two Sino-foreign joint venture fund management companies - Huabao SG Fund Management Co, by Huabao Trust and Investment Company and SG Asset Management, and China Merchants Fund Management Co, by China Merchants Securities and ING Asset Management.

Several other firms have won regulatory approval but are still in the preparation phase, including Guotai Allianz Fund Management Co, by Guotai Jun'an Securities Co and Allianz AG.

(China Daily April 3, 2003)