China's securities regulator published draft rules on Friday to strengthen supervision over major money market funds, a step that could further rein in Ant Group's Yu'e Bao.

The draft rules will tighten scrutiny over money market funds with a large size or a great number of investors, to protect investors' interest.

"Major" funds are defined by the rules as those with more than 200 billion yuan ($31.49 billion) in net assets, or with over 50 million investors.

Yu'e Bao, controlled by Ant Group, the payment affiliate of Alibaba Group Holding Ltd, is China's biggest money market fund with 764.6 billion in net assets by the end of September.

The new rules "will further strengthen fund managers' risk-management ability, improve product resilience, and ensure safety and liquidity" of investments, the China Securities Regulatory Commission (CSRC) said in a statement. It did not name any companies.

China has imposed a sweeping restructuring on Ant, whose record $37 billion initial public offering was derailed by regulators in late 2020. In April last year, China's central bank urged Ant to reduce the size of Yu'e Bao.

Yu'e Bao, previously the world's biggest money market fund, has already seen its asset under management (AUM) more than halve from its peak of 1.7 trillion yuan in early 2018.

According to Friday's rules, major money market funds "must not expand blindly," and their managers' pay must not be linked to the fund size.

In addition, fund managers must set aside 40% of the management fees as risk reserves, and should put in place more stringent risk control measures, and increase the frequency of stress tests.

Yu'e Bao, integrated with Ant's ubiquitous Alipay, is managed by Tianhong Asset Management Co Ltd, which is controlled by Ant. ($1 = 6.3508 Chinese yuan renminbi)