AsianFin -- China is reportedly exploring measures to cut the pay of fund managers who fail to meet performance benchmarks as part of a sweeping reform of the country’s 33 trillion yuan ($4.6 trillion) mutual fund industry.

The move aims to encourage long-term investments and improve accountability, according to sources familiar with the matter.

The China Securities Regulatory Commission (CSRC) is proposing a 50% salary reduction for fund managers whose products either incur losses or underperform their benchmarks by 10% or more. The sources, who requested anonymity due to the sensitivity of the discussions, noted that these pay cuts are part of a broader effort to establish a long-term performance evaluation mechanism. However, the specific time frame for assessing performance remains unclear.

Under the draft proposal, fund returns would carry a weighting of at least 50% in the evaluation of senior management, while other factors such as the size and ranking of the fund firms would be deemphasized. The proposal is still under discussion and could be subject to changes before finalization, the sources added.

This initiative reflects China’s push to align fund managers’ incentives with long-term investment outcomes and enhance the overall stability and performance of its mutual fund industry.