China to Tighten Private Fundraising Rules Amid Cross-Border Distribution Scrutiny

On September 4 2026, the China Securities Regulatory Commission (CSRC) published for consultation its draft “Administrative Measures for Fundraising by Private Investment Funds,” with the comment period open until October 4, 2026. The proposals build on the State Council’s 2023 private funds regulations and provide a more granular fundraising layer, while recent CSRC/Securities and Futures Commission of Hong Kong (SFC) cross-border scrutiny of investment fund activities (here) indicates the likely enforcement direction. Taken together, these developments point to closer regulatory attention on fundraising conduct targeting Mainland investors.

1. From self-regulation to administrative regulation

Private fund fundraising in China has historically been governed principally by Asset Management Association of China self-disciplinary rules. The draft proposals will elevate the key requirements into CSRC-administered regulation. However, this is not merely a codification exercise: It gives Chinese regulators a firmer enforcement basis and indicates that fundraising processes will need to withstand formal regulatory inspection.

2. A tighter fundraising perimeter

The proposals set out a detailed list of prohibited conduct, including public or disguised public offerings, fundraising from nominee investors, principal or return guarantees, misleading statements, improper benefit transfers, marketing in the name of a custodian, and the use of unqualified third parties for fundraising.

This is particularly relevant to referral and introducer arrangements. While introductions are not prohibited as such, any third party that is, in substance, soliciting investors or distributing fund interests without proper qualification is likely to raise concerns.

3. Higher qualified investor standards

For individual investors, the proposals introduce more granular eligibility requirements. Broadly, investors must not only satisfy the prescribed financial thresholds¹ but also demonstrate at least two years’ investment knowledge, experience, and risk awareness to understand the nature and risks of the relevant private fund investment.

For higher-risk funds — including funds investing primarily in real estate project company equity, single underlying assets, offshore underlying assets, or over-the-counter derivatives — the thresholds are higher: at least four years’ investment experience and double the prescribed financial thresholds².

4. Look-through scrutiny

Where capital is pooled through contractual arrangements, special purpose vehicles, or similar structures and invested directly or indirectly into a private fund, managers and distributors must verify ultimate investors and aggregate investor numbers. Although special qualified investors are treated differently, managers are still expected to take reasonable steps to identify actual investors and ultimate source of funds. This reflects a broader regulatory focus on substance over form and on preventing nominee, pass-through, or omnibus structures from obscuring beneficial ownership.

5. Suitability, verification, and records

The proposals materially strengthen suitability and verification obligations. Before marketing, managers and distributors must assess risk tolerance and risk identification capability, including source of funds, assets and liabilities, investment knowledge and experience, risk preference, and integrity record. Before execution, they must verify qualified investor status using appropriate supporting materials. If adequate materials are not provided, fundraising must not proceed.

The proposals also introduce tighter process requirements, including fundraising account controls, audio/video recording for individual investors, cooling-off periods, online audit trails, internal compliance review, and records retention for at least 20 years after fund liquidation.

6. Cross-border implications for offshore managers

For offshore private fund managers who have historically tapped capital from Mainland investors, the message is clear: Fundraising models should be reassessed. The draft proposals, together with recent CSRC/SFC scrutiny, suggest a shift toward substance-based review of Mainland investor participation, including who the ultimate investor is, how the investor was sourced, where marketing occurred, where the investment decision was made, and how subscription monies moved offshore.

Reliance on contractual representations, offshore vehicles, Hong Kong brokerage accounts, omnibus arrangements, SPVs, or reverse solicitation wording alone is unlikely to be sufficient where the facts indicate targeted fundraising from Mainland investors or raise People’s Republic of China regulatory or foreign exchange concerns. This does not mean Mainland investor participation in offshore funds is necessarily prohibited. But offshore managers and Hong Kong intermediaries should expect closer scrutiny of distribution channels, investor transparency, beneficial ownership, and source of funds, particularly where Mainland-facing introductions, digital promotion, roadshows, wealth management channels, or referral arrangements are involved.

The proposals mark a move toward a more formal, enforcement-oriented private funds regime. Managers should review investor classification, distribution and referral arrangements, marketing materials, suitability processes, source-of-funds diligence, and record retention. For offshore managers, the practical takeaway is sharper: Mainland investor participation in offshore funds cannot be assessed solely by reference to contractual representations, offshore vehicles, or selling restrictions.

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¹ Household financial assets of at least RMB5 million (approximately US$750,000), household net financial assets of at least RMB3 million, or average annual income of at least RMB500,000 over the preceding three years, plus a minimum investment of RMB1 million in a single private fund.
² Household financial assets of at least RMB10 million (approximately US$1.5 million) or household net financial assets of at least RMB6 million.