CHINESE money managers will face fiercer competition from both home and abroad despite a rosy outlook for mutual funds, industry insiders told a forum in Shanghai yesterday.

The government should give more freedom to fund firms and let the market decide the prices for their services, the forum - organized by Hexun.com to celebrate the 10th anniversary of China's mutual funds industry - was told.

"The industry has experienced fast growth this year. The rate of development will keep its momentum because of China's vibrant economy and a growing enthusiasm in investing," said Zhao Xuejun, chief executive officer of Harvest Fund Management Co Ltd.

"However, we also have to be aware of the growing risks of bubbles in the market and diversify our products more to meet competition from rivals both at home and abroad."

In 1997, China launched rules to regulate the budding mutual funds industry.

The industry has grown from nearly nothing in 1997 to about 3 trillion yuan (US$400 billion) up to September this year in terms of market value. It has had a sudden expansion in recent months as people move money out of low-yielding bank deposits and seek better returns in securities.

"Mutual funds companies have to become more self-disciplined, market-oriented and internationalized to meet the future challenges," said Xie Hongbing, chairman of Bank of Communications Schroder Fund Management Co Ltd.

The China Securities Regulatory Commission in June expanded the Qualified Domestic Institutional Investor project to fund management firms and brokers to allow them to invest client capital in overseas markets.

The QDII products launched by four fund ventures have so far received a warm welcome from mainland investors.