The Managed Growth Of China's Investment Fund Industry

Development is the fundamental problem facing China's investment fund industry, hence its growth has to be managed, in order to avoid the hazardous development, and to make sure the industry will advance, in a balanced way, along the optimum path.Based on the analysis of the demand side, which covers the consumers of banks, securities, and specially mutual fund in Shanghai area, the following features are highlighted: low income level, high sensitivity of price, over-expectation on the yield rate, and the consequential distortion about return-risk expectation. On the supply side, the fund managers tend to play a full-functioning role, at the cost of high marketing expenditure, and run in high-cost area. Besides the fund products do not differ at large, because the managers disfavor differentiation strategy, due to the lack of core resources and competences, and the absence of incentive mechanism. In this case, the high-cost supply contradicts with the low-price demand, thus the weaker will lose their money, and the stronger will be disable to maitain sustainable growth.Since China's financial service market is opening-up, the entry barrier becomes lower gradually, which will incur severe competitions from both new entrants and substitutes. Hopefully the concentration ration will decline sharply, and the industry divided into two groups: the weaker one and the stronger one. If not managed properly, the industry will suffer the E-type market structure.Fund managers, government and the market should make cooperative efforts to guide China's fund industry going through the initial development stage successfully. In this process, the interests of fund managers and investors will fit, the growth of firm value and industry development will fit, the product strategy and knowledge strategy will fit, the internal resources protection and the external resources sharing will fit. To realize these fits, the fund managers should lower the risk level of its portfolios, focus on localized and tailored innovations, and reject the harmful demands. Meanwhile, government should act as the guide, which is necessary and demonstrated by its early-mover counterparts. China's fund industry may achieve even higher growth rate, based on institutional innovation, the optimization of technical parameter, and utilization of backward advantage.The contributions of the dissertation are: firstly, to present an amended Porter's 5-forces model about China's investment fund industry; secondly, to advance 3 concepts, introduced innovation, localized innovation and original innovation, based on the A-U model; thirdly, to form the growth curve and the growth-stage curve of China's investment fund industry, based on the Elkan's model and the strategic growth concept that the author put forward.