(Yicai Global) Dec. 8 -- New regulations will prohibit Chinese charities from using their assets to make direct investments in life insurance and financial derivative products, as well as in stocks on secondary markets, as part of a government crackdown on illegal fundraising.
Charitable organizations should keep available cash assets sufficient to pay three-years of expenses for charitable activities in keeping with legal regulations, a new draft regulation from the Ministry of Civil Affairs (MOCA) states.
The Chinese government will introduce new rules to ensure that charities also do not use assets as deposits in non-banking financial institutions and investments in financial derivatives such as securities, share options, and swaps. The draft reiterates that charitable organizations may not engage in illegal fund-raising activities.
This draft reminds such organizations that assets derived from governmental schemes and those defined as unavailable for investments through donation agreements may not be used for investments.
The government set out the types of investments that charitable organizations may invest in. In addition to bank deposits, they may purchase investment products such as wealth management products, bonds, securities, and trusts issued by financial institutions such as commercial banks, as well as companies engaged in securities, fund management, trusts, and insurance asset management.
Charities must ensure that wealth management product investments are of the lowest independent risk rating, while bonds should be national debts and governmental bonds, policy-based and open banking bonds, as well as corporate and financial bonds rated as AAA-level by credit rating agencies. MOCA recommends investments in green bonds.
Charitable organizations should only purchase trust products from financing-based assembled funds trust plans or single money trust plans specially designed for and issued to these organizations. The associated credit rating should not be lower than A or the equivalent rating according to different rating agencies.
The draft also calls for charities to ensure that single investments do not exceed 30 percent of the organization's total assets.