China Is Cutting Fees on Its $4.9 Trillion Mutual Fund Industry to Boost Long-Term Investment

6 September 2025

China’s financial regulators have taken a decisive step toward reshaping how millions invest, unveiling draft rules on September 6, 2025 that aim to slash subscription and sales charges across the nation’s colossal $4.9 trillion mutual fund industry and redirect money flow toward long-term strategies. The move marks the final phase of a three-step reform that began with reductions in fund management fees and trading commissions. 

Under the new proposal, subscription fees for equity funds would be capped at 0.8%, a sharp drop from the previous 1.2%. Meanwhile, sales service fees applied to exchange-traded funds and bond funds would be cut in half. Most notably, investors who hold funds for longer than a year would be exempted entirely from sales service fees. State media estimate that these reforms could save investors nearly 30 billion yuan roughly $4 billion annually. 

This strategic overhaul has a clear intent: to increase the cost of short-term speculation and make long-term fund investment more attractive. Analysts from Zhongtai Securities underscore the goal, noting the proposal is designed to shift focus away from asset accumulation and toward genuine investor returns. 

The draft rules are now open for public consultation until October 5, inviting feedback from stakeholders across the industry. Regulators stress the reforms are ultimately intended to streamline the fund sales environment, better protect investor interests, and support a more stable market environment. 

For retail investors, the impact could be transformative. Consider this: shaving off a half-point or more in fees annually can compound significantly over a decade or more. Lower entry costs and fee-free encouragements for holding funds long term give everyday savers better odds of building substantial future wealth. At a broader level, there is hope that this move will inspire a cultural shift toward “buy-and-hold” attitudes, away from the fast-flip trading mentality that has sometimes overshadowed China’s financial markets.

Fund firms, on the other hand, are bracing for a rapid recalibration of revenue models. Reduced subscription and distribution fees could amplify pressure on smaller firms that rely heavily on such income streams. While larger fund managers may absorb the changes through scale and new performance-linked fee structures, newer or niche players risk being marginalized or forced to innovate faster.

Indeed, China has already begun introducing variable-fee products where fund manager compensation directly aligns with performance. Companies like ChinaAMC, China Merchants Fund, and E Fund Management are in motion, preparing new offerings that reward outperformance while penalizing underperformance. Regulators envision this as the industry’s future: results-driven, investor-centered, and merit-based. 

The reforms also reinforce a broader policy narrative one that emphasizes “common prosperity” and a shift away from fee-heavy fund sales. Recent measures included earlier restrictions on dubious commissions and proliferating third-party services sold at the expense of investor returns. The latest reforms aim to root out such practices and elevate transparency and accountability. 

Moreover, China’s continuous market rally having gained over 20% since April adds urgency behind these reforms. Regulators are keen to channel that momentum into sustainable growth, tempering speculative fervor with rules that promote stability. They hope to preserve confidence in equity markets while reducing the hyperactive trading behaviors that can leave retail investors vulnerable to sharp swings. 

Of course, challenges remain. For novice investors, the new rules may feel intangible unless paired with financial education. For asset managers, shifting to performance-focused fee structures requires deeper reporting, stronger asset allocation rigor, and enhanced accountability. And for the industry as a whole, the balance between cost efficiency and innovation must be carefully maintained.

Yet, for now, the takeaway is clear. This represents a landmark policy turn toward aligning fund industry practices with investor outcomes and financial stability. It is a signal that China’s regulators are intent on refining not just markets, but investor behavior and with it, the broader contours of its financial ecosystem.