The investment limitation for foreign fund management firms having a joint venture stake in Chinese retail mutual fund companies will be officially lifted on 1 April 2020, according to a statement from the China Securities Regulatory Commission (CSRC).
Similarly, investment limitations for securities companies will also be lifted in December next year, the regulator said.
The statement did not mention, however, when foreign fund firms can start applying for a 100%-owned retail mutual fund business in China.
The announcement comes after the securities regulator announced in July this year that it expects to officially end foreign ownership limits by 2020, but was not able to give more details at the time.
In April last year, the CSRC relaxed joint venture ownership limits for foreign asset managers, allowing them to apply for up to 51% ownership in a Chinese fund management firm. Back then, the regulator said it intended to remove the 51% cap by 2021, allowing foreign firms 100% ownership of domestic asset managers.
“The CSRC will continue to firmly implement the overall deployment of China’s opening up to the outside world [and] actively promote the process of opening up its capital market,” the regulator said in the statement.
Firms setting the stage
A number of foreign firms are set to hold a majority stake in a Chinese mutual fund business.
One of them is JP Morgan Asset Management, which, in August this year, paid $35m for an additional 2% holding in its joint-venture, China International Fund Management, taking its stake up to 51%.
Invesco has also moved towards majority control of its Shenzhen-based Invesco Great Wall Fund Management joint venture. Morgan Stanley and HSBC are also rumoured to be preparing to assume control over their joint ventures.
A number of other foreign firms also have a a 49% stakes in their enterprises, which include Allianz Global Investors, BNP Paribas Asset Management, UBS Asset Management, Aegon Asset Management and Franklin Templeton Investments.
Having a stake in a Chinese fund management firm allows foreign players to participate in the country’s $2trn retail fund market.
In addition, around 40 overseas asset managers have set up investment management wholly foreign-owned enterprises (WFOEs) which, depending on the type of licence they received, allows them to raise money from domestic investors to invest offshore (a qualified domestic limited partner licence), or sell a product invested in onshore assets to a maximum of 200 domestic qualified investors (private fund management licence).