Asset Managers Chase for China Prize

Asset Managers Chase for China Prize

International asset managers bound to make complex decisions as they strive to secure a place in China’s evolving investment market. The rapidly growing market promises rewarding prospects to global players and presents the possibility of generating a lucrative stream of profits.

Non-native asset managers may choose to either work with a local Chinese partner in a joint venture or establish a wholly foreign-owned enterprise (WFOE). They can also pursue both options simultaneously. It is expected that the international players who have already secured a WFOE license will be allowed to access the mass market from 2021 onwards which will generate larger gains than expected.

At the same time, however, global managers are prone to face the challenges that emerge as a consequence of changing regulations around asset management and investing in China. This has placed a great significance on their decision to choose between the different channels of investment i.e. whether to prioritize onshore, inbound or outbound finances.

According to a report published in April by Morgan Stanley and Oliver Wyman, the assets sourced from Chinese clients are expected to boom from 5.3tn dollars to 9.3tn dollars by 2023. This forecast proposes an immense incentive to foreign asset managers who are facing severe pressure in the investment markets back home.

Despite the potentially huge rewards, global asset managers appear to find investing in China as a difficult challenge – especially after the escalating political issues due to the China-US trade conflict.

Peter Alexander, Managing Director of Z-Ben Consultancy, has highlighted how the trade war is set to trigger a rapid change in the landscape of the Chinese investment market which most asset managers may not be prepared for.

Z-Ben has forecasted that by 2027, the assets held in China’s mutual fund industry will possibly reach 12tn dollars. Alexander suggested that foreign investors should take note of this development and be prepared for the local asset managers to enter as strong competitors. They should, therefore, prepare themselves for regulatory changes in China’s private pensions market regardless of whether they are allowed to participate immediately or not.

Some leading international managers – like Invesco, UBS, JPMorgan, BlackRock, Schroders, and Fidelity – have already started to build a lead in their operations in China. Meanwhile, the remaining asset managers prepare themselves to face significant challenges ahead, as they chase for the China prize.