Wholly foreign owned enterprises (WFOEs) in China are only allowed to offer fund products to professional investors. This is done by applying for a private fund management (PFM) licence from the Asset Management Association of China.
However, regulators are expected to relax rules to allow PFM licence holders to expand their business scope to include retail investors by 2021, according to a China Securities report, citing unnamed sources.
Fidelity, which has launched four onshore private funds in China, has already begun to plan public offerings, according to the report, quoting a source close to the matter. The report added that Fidelity also plans to suspend the issuance of new private funds in anticipation of the new regulations.
FSA sought more information from Fidelity, but the firm was not able to comment in time for publication.
There are around 18 foreign firms with a PFM licence. Of the 18, 14 have launched at least 30 onshore funds for professional investors.
According to the report, the industry expects that the new regulations will be in place by 2021.
At the moment, foreign managers are only able to participate in China’s retail market through a joint venture. However, in April last year, China’s securities regulator relaxed joint venture ownership limits, which allows foreign players to apply for up to 51% ownership. Previously, the limit was 49%.
The regulator is also expected to remove the 51% cap by 2021, allowing 100% ownership of domestic asset managers by a foreign firm.
China’s retail asset management industry is huge, with around RMB 12.9trn ($1.92trn) in assets.