Caixin
Jul 22, 2019 08:50 PM
FINANCE

China to Let Foreigners Take a Controlling Stake of Wealth Management Joint Ventures

A slogan for a financial product reads
A slogan for a financial product reads "full principal and interest promised." Photo: VCG

* Foreign asset managers will be able to take a controlling stake in wealth management ventures they enter into with Chinese banks or the subsidiaries of local insurers, the government announced

* A regulatory source told Caixin it’s not yet clear which agency will oversee the wealth management companies controlled by foreign asset managers

(Beijing) — China will relax the reins on foreign companies’ investment in the nation’s financial sector, loosening ownership limits on wealth management joint ventures and allowing overseas companies to underwrite all types of financing debt tools in the interbank market, under measures announced by the central government on Saturday.

Foreign asset managers will be allowed to take a controlling stake in wealth management joint ventures they enter into with Chinese banks or subsidiaries of insurers, according to measures (link in Chinese) released by the office of the Financial Stability and Development Committee under the State Council. They had not previously been allowed to do so.

No timeline has yet been set for the changes.

Allowing foreign institutions to control wealth management companies will help the sector to develop, a China Banking and Insurance Regulatory Commission (CBIRC) spokesperson said (link in Chinese) in comments published in the central bank-backed Financial News on Monday.

It’s currently hard for existing companies to meet the needs of China’s fast-growing asset-management market, the spokesperson said.

Right now, foreign asset managers are overseen by the China Securities Regulatory Commission, while wealth management subsidiaries are regulated by the CBIRC. A regulatory source told Caixin it’s not yet clear which agency will oversee the wealth management companies controlled by foreign asset managers.

The new measures also allow foreign institutions to apply for the Type-A lead bond underwriter license in the interbank market. That will let them underwrite all debt financing tools in the interbank market, the People’s Bank of China (PBOC) explained in a notice (link in Chinese). Foreign institutions have previously only been only allowed to be the lead underwriter for corporate panda bonds — yuan-dominated bonds that are issued by overseas nonfinancial institutions in China.

Foreign institutions will also be allowed to rate all type of bonds traded in the interbank market and on China’s Shanghai and Shenzhen stock exchanges. Their rating services were approved only for the interbank market by the PBOC in July 2017.

Foreign ownership limits on securities companies, fund management companies, futures companies and life insurers will also be scrapped by 2020, one year ahead of the original plan set by the negative foreign investment list released this year, according to the measures. The earlier-than-expected ownership cap lift in securities companies, futures companies and life insurers were previously mentioned by China’s Premier Li Keqiang during the opening session of Summer Davos in early July.

Zhang Yuzhe contributed to this report.

Contact Reporter Liu Jiefei (jiefeiliu@caixin.com)

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