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Business

10,000 hedge funds shut down in China

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Opening sequence

Business

10,000 hedge funds shut down in China

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COMING UP:10,000 hedge funds shut down in China

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00:00:01
>> 10,000 hedge funds wiped out in just six months. Chinese regulators on Tuesday spelling out the impact of a sweeping crackdown on an industry so riddled with fraud, it's known as the wild east. Reuters explains why the government's been clamping down so hard.>> There are often entities that look as though they're funds, and it gives them a veneer a legality so people actually think that they are proper funds, whereas in fact they're coming carrying on criminal activities.
00:00:32
There have been a massive array of different illegal activities from managers that run away with a lot of people's invested funds, to certain funds engaging in illegal fund raising were making high interest loans. So those are all illegal activities in China.>> Chinese hedge funds were thrown into disarray earlier this year when Beijing brought in tough new rules to weed out shady dealings.
00:00:57
At the heart of the problem so called phantom managers who register funds but never actually issue products, they're just fronts for crooked business. There are now strict new rules about qualifications needed to start a fund, but many analysts say the process has been rushed, and that could have a serious impact on the economy.
00:01:15
>> The rules came in, and they weren't really warned about the rules. And as a result, because registration has been halted in many different cities over the course of this year, it means that activity with in this sector has significantly slowed down, or in certain cities, stopped altogether.
00:01:33
>> Problems or not, this almost certainly won't be the last we hear of Chinese funds being shut down and licenses revoked. Analysts expect at least another 2,000 managers to lose their businesses. Damage control for Beijing as it tries to lure in investment in uncertain times.