A protection fund for securities investors will be created in China, the regulators announced on February 21. It can stabilize the market in the short term but is unlikely to address key investor concerns, analysts said.
Funds for the protection fund will be provided in part from interest received from subscriptions in share, convertible bond, and other securities offerings on the two Chinese stock exchanges, reported the China Securities Regulatory Commission and the Ministry of Finance.

By this notice the government acknowledged the creation of such fund but it didn’t provide any details of its functioning.

Analysts said they are waiting for more details, including the potential size of the fund.
Still, the benchmark Shanghai Composite Index gained 2% yesterday to end at 1284.48 points on hopes the protection fund may be a precursor to more market-boosting measures, according to Dow Jones Newswires.
Nontradable state shares make up the bulk of stock capital in an average listed company in China.
Concern is rising amid investors that the government could allow nontradable state shares to trade. The regulators’ previous attempts to tackle this problem resulted in a sharp decline in the market though experts admit that the market would benefit from such fund in future.

Before the protection fund is created, interest from securities subscriptions would be put into a special central government account, according to the notice, that refers to Jan. 17 and takes effect immediately.

Chiang Hsien, chief executive of Guotai Junan Allianz Fund Management Co. in Shanghai, named the decision on protection fund creation to be sign that the government is taking care of retail investors. But he added that implementing the fund would be difficult.