Smaller is better for Chinese joint ventures

Merging_blocksForeign firms that wish to gain majority control of Chinese financial services companies have been advised to select small firms as their joint-venture partners. Now that the Chinese government has raised the cap on foreign ownership in financial services from 49% to 51%, foreign companies see an opportunity to assert themselves. However, “those in existing joint ventures (JVs) with bank-affiliated local managers may find it difficult to gain majority control over the business, as banks have strong power to push back," said Ye Kangting, an analyst with research firm Cerulli Associates. “Global managers may find greater opportunities to form JVs with, or fully acquire, smaller players that are struggling to raise assets and profits.” Foreign companies also have the option to set up wholly foreign-owned enterprises (WFOEs) – another strategy to give them control over their onshore businesses. To date, 13 WFOEs have registered as private securities fund managers with the Asset Management Association of China, according to Cerulli. “Foreign managers should choose the approaches that work best for their business models,” said Ye Kangting. “They need not be limited to a single approach, given the greater number of avenues to tap Chinese assets.” ©2018 funds global asia

Executive Interviews

INTERVIEW: Operational challenges

Jun 09, 2018

Caroline Higgins of Northern Trust tells George Mitton about A-share inclusion, ETF Connect and why Cayman funds predominate in the region.

INTERVIEW: Making a name

Apr 18, 2018

Formed by a merger in 2012, Old Mutual Global Investors was little-known in Asia. Carol Wong, managing director for Asia-Pacific, is changing that. She talks to George Mitton.


SINGAPORE ROUNDTABLE: Optimism versus caution

Oct 23, 2018

The impact of financial technology, developments in Asian passporting and the promise of new markets in Thailand were among the topics discussed by our panel. Chaired by George Mitton in Singapore.

HONG KONG ROUNDTABLE: a long-term project

Jun 09, 2018

Our panel discussed robo-advisers, ETF Connect, and why the mutual recognition of funds (MRF) scheme will take time to develop. Chaired by George Mitton in Hong Kong.