Hedge funds have invested as much as $50 billion in China's stock markets, according to a study by a government think tank cited by the South China Morning Post.

The amount is about a third of the 1 trillion yuan of mutual fund managed assets in China, the Hong Kong-based newspaper reported, citing Zhang Yuewen, a research at the Chinese Academy of Social Sciences.

China should enhance supervision of short-term capital flows and business between hedge funds and local investors, the paper reported, citing Zhang.

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