China regulator urges funds to back innovation, warns on hype

Wu's remarks follow recent moves by the CSRC to tighten oversight of the country's $3.4 trillion private fund sector and crack down on illegal cross-border investments. He noted the increasing volatility in global markets, citing a recent plunge in U.S.-traded chipmakers that erased approximately $1.3 trillion in market value. The regulator stressed that rising external uncertainties and a major rebalancing of global assets necessitate a compatible financial system for the new wave of technological revolution, particularly artificial intelligence.

Private equity firms were specifically encouraged to adopt a more strategic and fundamental role in fostering innovation, with an emphasis on long-term investment in early-stage, hard-technology startups. Fund managers were also advised to leverage new technologies like AI to enhance their operations. However, Wu cautioned against "concept hype," complex investment structures, and excessive speculation. Additionally, regulators plan to increase supervision of computer-driven program trading to ensure a level playing field and prevent the misuse of technology.