Acquisition of Domestic FMCs by Foreign Investors Part I

September 01, 2007 | BY

clpstaff

By Hubert Tse and Sandra [email protected]; [email protected] Chinese stock market continues to outperform all the equity markets around…

By Hubert Tse and Sandra Lv

[email protected]; [email protected]

The Chinese stock market continues to outperform all the equity markets around the world in 2007, while the Chinese asset management market is expanding at a blistering pace. In 2001, the first open-ended fund was established in China, and by the end of that year the total size of fund assets in China reached approximately Rmb80.9 billion (US$10.72 billion). As of June 30 2007, the net asset value of open-ended funds (excluding the Chinese social security fund, corporate annuities and QDII funds) have reached approximately Rmb1.6 trillion (US$212 billion), accounting for approximately 29.87% of the total assets of the Chinese stock market.

Foreign financial institutions, attracted by the huge market potential of the Chinese asset management industry, entered the Chinese asset management market through setting up Sino-foreign joint venture fund management companies (FMCs). Substantial profits have been reaped to date and as of September 1 2007, there are a total of 59 fund management companies in China, of which 28 are Sino-foreign joint venture [JV] FMCs.

Despite the tremendous development of the asset management industry in China, the China Securities Regulatory Commission (CSRC) has been strictly controlling the set up of new FMCs in the last two years. In 2006, only two FMCs were approved by the CSRC to be formed. The pace of approval was not enough to satisfy the demand and enthusiasm of foreign financial institutions rushing into China to grab a slice of the ever-growing Chinese asset management market. In the last two years, a substantial number of foreign financial institutions have instead bought into existing domestic FMCs to tap the Chinese market. AEGON, Nikko, and a number of other foreign financial institutions such as Pioneer, Morley (affiliate of Aviva) and Morgan Stanley are now actively identifying their acquisition targets.

There have been a large number of asset management deals here in China in recent years and in the process there have been great changes in the way acquisition of domestic FMCs by foreign financial institutions have been undertaken in China.

Currently, there are three ways by which foreign investors can acquire equity interests in Chinese FMCs

This premium content is reserved for
China Law & Practice Subscribers.

  • A database of over 3,000 essential documents including key PRC legislation translated into English
  • A choice of newsletters to alert you to changes affecting your business including sector specific updates
  • Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
For enterprise-wide or corporate enquiries, please contact our experienced Sales Professionals at +44 (0)203 868 7546 or [email protected]