BEIJING - China will encourage private equity funds to participate in mergers and acquisitions (M&As) to drive the healthy development of the country's fund sector, the top securities regulator said Monday.

Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), made the remarks during a speech at a forum commemorating the 20th anniversary of the country's fund industry.

He said that private equity funds and venture capital funds will be supported in participating in M&As, debt-to-equity swaps and equity investment, underscoring their role in galvanizing market vitality.

Mutual funds, private equity funds and other asset management plans now own 5 trillion yuan ($721 billion) worth of A-share market capitalization, or 10 percent of the total, Liu said.

He also pledged support for the establishment of more buyout funds, which will ease financing and improve corporate governance for listed companies and forestall risks of equity pledges.

Foreign-invested asset management institutions will receive support in running equity assets-related businesses, and private equity funds investing in high-tech enterprises will be granted favorable fiscal and tax policies, Liu said.

The CSRC said last week that China will continue reforming the financial market while promoting opening-up and innovation to stabilize and boost market confidence.