China's regulatory officials are striving to submit a draft of the long-awaited Securities Investment Fund Law to the Standing Committee of the National People's Congress (NPC) next month, the Beijing Business Today reported yesterday quoting unidentified 'authoritative' sources. If passed by the NPC, the law will be the first piece of legislation to govern China's securities fund industry, including venture capital funds. At present, the only rules governing China's investment funds are the Securities Investment Fund Management Provisional Regulations introduced in 1997. 'It has been a long time since 1997. There are many areas [of the 1997 regulations], which are no longer appropriate to the current conditions,' said China Great Wall Securities funds analyst Yu Xiaomei. China's legislators have spent more than five years drafting the Securities Investment Fund Law. According to Beijing Business Today, the main reason a draft of the law still has not been completed is because a consensus cannot be reached over rules for industrial investment funds. In the interest of passing the law as soon as possible, the more controversial parts regulating industrial investment funds were dropped from the draft. The document also fails to cover government construction, social welfare and insurance funds. But the most glaring failure is the lack of regulations governing China's underground fund industry. This unregulated sector, also known as private funds, are often run by former employees of mainland brokerages catering to wealthy mainland individuals or a group of friends who pool their money to play the stock market. At the end of last year, the People's Bank of China estimated that the country's underground fund management industry was holding 700 billion yuan (about HK$656 billion) or 40 per cent of the Shenzhen and Shanghai stock markets combined. However, Beijing has not entirely dropped the idea of issuing regulations covering the underground fund industry and other areas. It is likely to wait until conditions are ripe before issuing amendments to legalise the underground movement.