Several hundred institutional investors and fund managers from China and abroad gathered in this eastern financial hub for an international conference on enhanced index funds, to discuss the feasibility for fostering more index funds in China's interior regions.

China's fund management business had maintained a robust growth in recent years, and the launch of index funds would bring a new vitality to its capital market and consequently draw more investors from home and abroad, said Zhou Qinye, vice-president of the Shanghai Stock Exchange.

"With a still better regulated security market and a more comprehensive index system, we're ready to embrace more index funds," he told the gathering.

China already had more than 50 funds of different types, with a total value of 100 billion yuan (about US$12 billion).

However, China still lagged behind some developed countries in terms of market capacity and diversity, particularly in open-ended index funds, warned Han Fanghe, president of the Hua'an Fund Management Company, which launched the country's first open-ended fund, Hua'an Innovation Fund, last year.

"This has failed to cope with the ever-growing demands for investment in many sectors, including insurance and social security," he said.

Most experts attending the conference expressed the belief that enhanced indexed funds would make a major supplement to China's existing funds and would be an ideal choice for insurance funds and other institutional investors that have higher risk management demands.

Index funds, which appeared in the United States in the early 1960s, are now popular in many Western countries.

Commercial General Union, the largest British insurance company and a leading fund manager in Europe, launched the first China Index Fund in 1997 to help investors gain exposure to the growth in China through the B share market that was then reserved for foreign investors.

(People's Daily September 28, 2002)