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January 22, 2006
China considering opening the market to hedge funds
It was recently announced by the Banking Regulatory Commission, China, that a special committee would be formed to look into hedge funds. This committee would determine how difficult would it be to regulate these funds if the country allowed them.
It has been indicated by sources that a number of signs were visible that the country would soon allow hedge funds. So far, the reason for hedge funds being a taboo in the country could be largely attributed to the belief that these were responsible for the Asian financial crisis a decade ago. Another misconception that investors in China had was that these funds ensure high returns because of the high risk factor.
It is now being recognized that hedge funds add liquidity and increase market efficiency. This move is also aimed to provide an impetus to the governments move towards greater market liberalization.
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