The central bank has spearheaded the drafting of new regulations to tame China's 60 trillion yuan (HK$67.7 trillion) "asset management" industry.
According to people who have seen the draft regulations, the rules would bring the various kinds of asset management products and investment schemes offered by all kinds of financial institutions under the one regulatory umbrella.
Oversight for the flourishing sector is now split between the securities, banking and insurance regulators.
China Minsheng Banking chief analyst Wen Bin said regulatory standards differed between watchdogs and a unified system would help regulators cut systemic risks and financial leverage.
"China's financial innovation has grown quickly in the past few years and the blending of financial operations through asset management products has challenged the fragmented regulatory system," Wen said.
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Mainland financial institutions, including banks, mutual fund firms, brokerages and insurance companies, have rushed to set up asset management schemes, raising funds from clients and then investing in a range of markets and projects. These schemes are usually beyond the watch of regulators and harbour growing risks for the country's financial stability – something the leadership is determined to eliminate ahead of a big power reshuffle due late this year.
If rolled out, the rules would ban financial institutions from promising clients a minimum or fixed return from their products.
Institutions would have to contribute 10 per cent of their management fees to a risk reserve fund, and funds in one "asset management product" could not be used in another, except in authorised cases.