A Deutsche Bank office building in London. The German lender is in talks with the wealth management unit of the Postal Savings Bank of China to set up a joint venture. [Photo/PA IMAGES]
Diversified structures to offer more comprehensive wealth management products
Foreign financial institutions are accelerating their deployment in China’s asset management industry through the establishment of wealth management joint ventures as the country further opens up its booming financial market.
In the process, wealth management joint ventures could leverage the advanced experience of their foreign shareholders in a number of areas, including cross-border investments as well as environmental, social and governance investments, to create advantages differentiated competition, experts said.
French bank BNP Paribas recently obtained approval from the Chinese authorities to set up a wealth management JV in the country. The company will be jointly funded and established, with the asset management unit of BNP Paribas contributing 51% of the financing and Agricultural Bank of China Wealth Management Co, a wholly owned subsidiary of Agricultural Bank of China, contributing 49%. .
BNP Paribas has joined four other global companies – Amundi, BlackRock, Schroders and Goldman Sachs – in forging their way into the growing Chinese asset management market.
Additionally, Deutsche Bank is in talks with the wealth management unit of the Postal Savings Bank of China to set up a joint venture, Beijing-based Caixin Media reported. The German bank declined to comment further as discussions are still ongoing.
At the end of June, the balance of Chinese wealth management products that have not yet reached maturity stood at 29.15 trillion yuan ($4.02 trillion), up 12.98 percent year-on-year, according to the China Banking Wealth Management Registration and Depository Center.
Zeng Gang, director of Shanghai Institution for Finance and Development, said, “Establishing joint ventures is an effective measure for wealth management units of commercial banks to attract foreign investment and learn from advanced international experience. It is also a useful exploration to promote both – the opening up of China’s financial sector and the dual circulation development paradigm.
Under a diversified ownership structure, the corporate governance system of wealth management JVs and other wealth management companies will have significant differences. This will lead to distinctive characteristics of joint ventures in terms of development strategies, business expansion paths and creation of salary incentives and product systems, Zeng said.
The major foreign shareholders of the wealth management joint ventures are internationally renowned asset managers with long experience in asset management and exceptional capabilities. Compared to domestic wealth management firms, they may have greater market-focused operational experience and greater ability to invest in equity-based products, he said.
The JV established by BNP Paribas and ABC Wealth Management will leverage the respective advantages and characteristics of the two shareholders to better meet the increasingly diverse investment and wealth management needs of various types of clients, the Agricultural Bank said. from China.
The accelerated movement of foreign investors entering China’s wealth management market has been spurred by the announcement by the State Council – China’s Cabinet – of 11 measures to promote further opening up of the sector financial. In 2019, the country allowed foreign companies to form majority-owned wealth management joint ventures with wealth management units of local banks and insurers.
Goldman Sachs announced June 24 that its wealth management joint venture with Industrial and Commercial Bank of China has received regulatory approval to begin operations.
Registered in Shanghai, Goldman Sachs ICBC Wealth Management is the fourth Sino-foreign wealth management company approved by the China Banking and Insurance Regulatory Commission, with a registered capital of 1 billion yuan. The US investment bank’s asset management unit took a 51% stake in the joint venture while ICBC Wealth Management took 49%.
Amundi BOC Wealth Management, Schroder BOCOM Wealth Management and BlackRock CCB Wealth Management, which were approved to start operations early, had 150, 28 and five Wealth Management Products (WMPs), respectively, which had not yet reached maturity at the end of October 24. , according to chinawealth.com.cn, a WMP information research website.
BlackRock CCB Wealth Management received a nod from CBIRC to participate in a pilot program of WMP for retirement planning and has rolled out such a product, which is likely to become a major direction in the allocation of assets by wealth management joint ventures, experts said.
jiangxueqing@chinadaily.com.cn
