China has officially permitted commercial banks to launch their own mutual fund ventures, a move aimed at supporting its fledging capital market and expanding lenders’ revenue sources which may pose challenges to existing fund managers.

China’s central bank and banking and stock market regulators announced the new rules on Sunday allowing commercial banks to set up mutual funds that can immediately make investments in the less risky money and bonds markets.

The move enables Chinese banks to go beyond their traditional lending operations and get better prepared for tougher competition as China gradually opens the sector to foreigners. Many investors and analysts also regard it as the first step towards eventually allowing banks to invest directly in China’s stock market.

The new rules “will enable banks to make more effective use of savings, injecting more funds to the capital market, and will help strengthen institutional investors,” according to the statement.

But the move may have negative impact on China’s already depressed traditional mutual fund industry. China has about 50 mutual fund managers which have been suffering a drop in demand for new funds in recent years due to prolonged decline in the domestic stock market.