"Several QDII applicants have been told to change their products. This is apparently aimed at avoiding a shock to the Hong Kong stock market," a fund industry source familiar with the matter told Reuters on Monday.
Hong Kong-listed stocks, particularly shares issued by mainland Chinese firms, have soared this year, mainly on expectations of a flood of fund inflows from mainland China.
Separately from the QDII scheme, which targets institutions, Beijing has also proposed a "through train" programme that would allow mainland residents to invest directly in Hong Kong stocks.
In another sign of Beijing's concern that a sudden influx of mainland money could cause turmoil in Hong Kong's stock market, Chinese Premier Wen Jiabao said over the weekend that Beijing was still studying the "through train" proposal.
The remarks triggered a slide in Hong Kong stocks on Monday, with the blue-chip Hang Seng Index falling 3 percent.
"The CSRC is requiring all QDII fund issuers, no matter whether they are banks or mutual funds, to keep their investment ratio of Hong Kong stocks under control," another of the sources told Reuters.
Authorities have just rejected an application by a Shanghai-based mutual fund company to launch a QDII fund designed to invest more than 80 percent of its proceeds in Hong Kong stocks, the sources said.
A foreign bank in China has also been told by the CSRC to revise a QDII product previously designed to target only Hong Kong stocks, they said.
This year, four Chinese fund houses, including JPMorgan's China fund venture and Deutsche Bank's China fund arm, have raised a combined $16 billion under the QDII scheme, which was launched in April 2006.
A large portion of the proceeds has been pumped into Hong Kong-listed Chinese stocks, most of which are trading at a hefty discount to their mainland-listed counterparts.
Another six fund firms, including a venture co-owned by Belgian-Dutch financial services group Fortis and the Chinese fund ventures of Credit Suisse and DBS, have also received approvals for QDII stock launches.
A number of major domestic brokerages have also obtained QDII licences over the past few months.