The green light was finally given last month and surprisingly twice, when the securities watchdog issued two licences for such joint ventures. They involve two Shanghai-based firms and financial giants based in Germany and France.

The establishment of joint ventures will surely give a strong push to China's emerging fund industry which is receiving the cold shoulder from investors despite the securities watchdog expects the funds would act as market stabilizers.

Joint ventures will introduce international expertise in risk management, internal control, product design and portfolio management.

Launching such joint ventures will also bring healthy competition to the funds industry and upgrade its industrial structure.

China's funds industry is certainly the largest beneficiary from such joint ventures.

But the significance of the establishment of these joint ventures extends far beyond the funds industry.

Issuing of the licences - a breakthrough in the opening of the securities market - indicates that China is accelerating the opening of its capital account.

China has been cautious in opening the capital account, especially after witnessing an Asian financial crisis that partly resulted from international short-term capital speculation in the money and stock market.

But the opening of the securities market means the country has become more confident in dealing with any possible impact. Such confidence is based on the country's improved supervision capacity and expanding economic strength.

Furthermore, the establishment of the joint ventures shows that China is a responsible country which will fulfil its World Trade Organization (WTO) commitments.

China's WTO commitments have allowed foreign companies to set up fund management joint ventures, with a maximum foreign share ratio of 33 per cent in the first three years and 49 per cent hence.

(China Daily November 4, 2002)