Global Asset Managers’ Journey To China
Global asset managers started their journey in China’s asset management industry some time ago. In 2003, the first FMC joint venture – between Pacific Asset Management Co., Ltd. and Allianz Group, was established following regulatory approval. By the end of 2020, there were 44 FMC joint ventures in China. Six of them are included in the top 30 list (see figure 12).
Until 2020, foreign partners were only allowed to have minority shareholding (up to 49%) in the FMC joint ventures. Most of these ventures have proved to be very profitable financial investments for global asset managers as shareholders. But the ventures are generally regarded as local brands and many global managers have been seeking to have their wholly-owned or controlled entities in China to execute their global strategy. In October 2019, CSRC issued a statement pledging to allow 100% foreign ownership in FMCs by 2020 and in August 2020, BlackRock Financial Management Inc. was approved to establish its 100% owned FMC.
Prior to this relaxation, there was another breakthrough in 2016 when global asset managers were given the right to apply to operate wholly-owned private fund managers (PFMs) in China. Following registration with the Asset Management Association of China (AMAC), PFMs can raise funds from qualified investors (mainly high net worth individuals) by launching private funds. Many global firms have taken this route and by the end of 2020, there were 31 foreign wholly-owned PFMs in China (see figure 13). However, while some are doing well, capital raising has been a major challenge for many foreign PFMs.
More recently, global asset managers have also gained market entry into CBIRC regulated asset management categories via:
- joint ventures with bank wealth management companies. In September 2020, Amundi Asset Management Company established a joint venture with BOC Wealth Management Company, with a 55% shareholding[1];
- joint ventures or wholly-owned subsidiaries in insurance asset management. In January 2021, Allianz Group was approved to operate a wholly-owned insurance asset management company in China. Early in 2019, four global institutions, through their Chinese insurance joint ventures, set up insurance asset management businesses in China.
- Joint ventures in pension management companies. In January 2021, Hengan-Standard Life, an insurance joint venture between Standard Life Aberdeen and its Chinese partner, established a pension management company in China.
In summary, global asset managers now have various options for entering China’s asset management market either through joint ventures or wholly-owned subsidiaries. Joint ventures usually benefit from the Chinese partner’s fund-raising support in the local market, while wholly-owned subsidiary route ensures the manager has total control of the strategy and operations of its business in China.
[1] Source: CIBRC.
