Cash & Liquidity Management

An overview of money market reform in China and its implications for corporate treasurers

Published: Nov 2016
J.P. Morgan Asset Management Thought for the Month – building stronger liquidity strategies – let's solve it.

November 2016

In December 2015, the China Securities Regulatory Commission announced the introduction of new guidelines for domestic money market funds. These guidelines, which came into force on February 1, 2016, represent the most significant and comprehensive changes to the rules governing Chinese money market funds since the industry was established in 2004. The new guidelines aim to reduce risk, increase liquidity, improve disclosure and encourage more proactive credit control by the fund manager. They also should help improve standardization and availability of information, and bring Chinese money market funds more closely in line with Western money market fund guidelines.

For institutional-focused funds with AAA ratings, the impact of the new guidelines will be negligible; that is because rating agency guidelines have significantly tighter restrictions. For the much larger retail money market fund sector, the new guidelines will increase liquidity while reducing credit and interest rate risk. Whilst the new rules improve disclosure standards and encourage more proactive credit control by the fund manager, they will also negatively impact fund yields and the ability of fund managers to outperform their peers.

To hear more about the new guidelines for China’s domestic money market funds, read the ‘Money market reform in China’ whitepaper by Aidan Shevlin, Head of Asia Pacific Liquidity Fund Management at J.P. Morgan Asset Management. You can also download other Liquidity Insights from our J.P. Morgan Global Liquidity website www.jpmgloballiquidity.com With its user-friendly navigation, you’ll find a seamless connection between liquidity investment solutions and our best thinking, which can help you meet your goals in today’s complex investing environment.

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