Can you tell us how much the mutual fund market in China has grown over the past year?

Joe Mansueto: In 2006, the fund industry in China grew at an incredibly rapid rate, doubling in size to a total value of almost 900 billion yuan. There were two main reasons for this explosive growth. First, the Chinese stock market rallied strongly throughout last year, with the Shanghai Composite Index advancing more than 100 percent. This not only attracted many investors, but also drew more capital to the fund market. Secondly, the Chinese fund industry, launched just six years ago, was in its initial stage of growth. From a long-term perspective, the developmental prospects of China's fund industry are very promising.

Did the U.S. fund industry experience a similar rapid growth phase?

The U.S. market experienced a similar growth phase. At that time, all investors moved their bank deposits and other low-interest accounts to longer-term investments such as stocks and bonds. As a result of this change in mentality, people started to use long-term investments to replace savings, and for this, funds became an excellent option. A very important element of funds was that they allowed investment diversification. And, for a small fee, they could be maintained by a professional asset management organization. At that time, the market was booming. In 1982, the U.S. stock market was bullish, attracting hordes of new stock investors. It was only natural given the market situation that people chose funds.

Did the exodus of deposits, investments and other financial tools cause a crisis for U.S. commercial banks?

Many U.S. banks were in dire straits. I remember participating in numerous fund-related meetings and the topic was always what should the banks do and when should they enter the fund business. At that time, the banks were financial institutions under strict control; they were generally not allowed to participate in fund activities. But the laws soon changed and banks gained permission to launch their own mutual funds as a countermeasure. The number of people putting their money into savings accounts decreased dramatically as they preferred to invest in mutual funds. The banks, by operating their own funds, eventually became the driving force in the fund industry.

Last year, you likened the mutual fund industry in China to the U.S. fund market of 20 years ago. Today, do you see the gap narrowing?

The size of the Chinese fund industry is about $100 billion and the current size of the U.S. fund industry is over $10 trillion; so in other words, the scale of the U.S. fund industry is 100 times that of China. The mutual fund industry in the United States started in the 1920s and has developed over the past 80 years. In contrast, China's fund industry only has a six-year history. I believe that if the fund industry in China had had 80 years of development, it would also have reached $10 trillion, and perhaps in a shorter time-frame.

Comparing the current Chinese market with the then U.S. market, what are the biggest differences?

Investors in China are now using long-term investments to replace savings-a transition that happened many years ago in the United States. The difference is the development of speculative investing in some sectors. During an IPO, speculations are rampant in the United States, particularly in the IT industry. But during the developmental phase of mutual funds in the United States, the motive of American investors was not speculative; they were looking for higher returns. When bank interest is only 5 percent and other capital markets are offering 10 percent, it is only natural that investors will abandon bank savings to