Since the publication in early 2018 of our last thought-piece on China entry, “Global Asset Managers in China: Riding the Waves of Reform”, the wave of entries into China has continued with great momentum. 22 global asset managers have set up private fund management (PFM) companies in China. Many firms have been actively converting their FMC JVs into majority ownerships. Some firms have even been considering Bank Wealth Management Subsidiaries (WMSs) as another plausible structure. Four global investment banks have already obtained majority-owned securities JVs, with many more such JV applications pending as of the time of writing.
Looking at the big picture by collating all the materials developments in the last few years, we believe that this is now a much better time for global players to compete in China than it was a decade ago. Local Chinese investors have begun to look for more sophisticated financial services as they mature, and global investors are increasingly allocating more resources towards China. The introduction and development of cross-border investment schemes are now providing global investors with easier access to the China market. The fundamental shift in China’s financial system from banking and shadow banking towards capital markets is challenging legacy ‘gold standards’ for wealth and asset management and calling for innovation for which global players are well positioned. We expect this to translate into revenue pools of approximately USD 15 billion for global players by 2023.
For players with vastly different backgrounds and stages of development in China, we believe it is imperative to do the following: calibrate an appropriate overall China ambition; design business propositions in conjunction with keeping licence application considerations in the mind; consider a series of organic, inorganic and partnership avenues for growth; and lastly, develop future-proved infrastructure that is most suited for China’s unique but evolving market structure.
