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BlackRock applies to set up China mutual fund business

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Via Financial Times

BlackRock, the world’s biggest asset manager, has applied to set up a mutual fund business in China, taking advantage of the latest liberalisation of the country’s financial services sector.

The China Securities Regulatory Commission said it had accepted applications from BlackRock and US investment manager Neuberger Berman, as authorities on Wednesday removed restrictions on fully foreign-owned fund management companies. Beijing also eliminated the cap on foreign ownership of securities businesses.

The opening of China’s fund industry is a pivotal moment for fund managers eager for a slice of a growing market that offers millions of potential investors for their mutual fund products. Foreign financial services companies and their governments have for the past 20 years been lobbying Beijing for greater participation in its domestic market.

In spite of disruption caused by the coronavirus pandemic, China has in recent months been moving more quickly to allow foreign participation in its financial sector, partly in response to the trade war with the US. Last year officials brought forward the timeline for full foreign ownership of securities, futures and fund management companies to 2020.

Authorities on Friday gave Goldman Sachs and Morgan Stanley permission to take majority control of their China securities ventures.

BlackRock has long harboured ambitions to expand its China business, and chief executive Larry Fink considers the market one of the company’s largest future opportunities.

“China’s $14tn asset management industry is the third-largest in the world, and as the Chinese market opens to foreign asset managers, our global reach and whole-portfolio approach will help us become the leading foreign asset manager in China,” Mr Fink wrote to shareholders on Sunday.

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BlackRock already owns 16.5 per cent of Bank of China Investment Management, part of Bank of China, a legacy holding the asset manager picked up through a past acquisition.

“The rules allow what’s called one plus one, meaning as a foreign firm you can own one majority and one minority stake in a business. So they can keep that stake and do a new business on their own,” said Peter Alexander, managing director of Shanghai consultancy Z-Ben. 

“The real issue now is moving from plans on paper to executing those plans. That will take time,” said Mr Alexander.

The Chinese market is already highly competitive with state-owned banks, private companies, and new financial technology companies offering domestic investors a range of offerings and investment options.

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