Chase & Co. agreed to pay $410 million for a stake in a leading Chinese wealth-management business, as the U.S. financial industry continues to make inroads in China.
The U.S. banking giant’s asset-management arm plans to take a 10% stake in the wealth subsidiary of
China Merchants Bank.
The deal, which is pending regulatory approval, marks the first time a Chinese bank has opened up its wealth-management subsidiary to a foreign strategic investor.
U.S. investment banks, asset managers and credit-card companies have long coveted a bigger presence in China but were held back for decades by ownership restrictions on financial businesses. Wall Street has emerged as a big winner in the trade war between Washington and Beijing, after a pact signed in January 2020 promised greater access to China’s financial sector for American institutions.
Friday’s agreement builds on a partnership agreed in 2019, under which J.P. Morgan Asset Management and the Chinese bank said they would collaborate on product development and investor education.
“We hope that the strong alliance will contribute to the opening up of China’s financial industry,” said Liu Hui, executive assistant president of China Merchants Bank and chairman of the group’s wealth subsidiary.
Other foreign financial firms have opted to form joint ventures with the wealth-management units of Chinese banks instead of investing directly in these subsidiaries.
The Shenzhen-based bank, part of state-owned conglomerate China Merchants Group, is one of the country’s largest commercial lenders. Its wealth-management subsidiary managed the equivalent of $377 billion at the end of 2020, up 12% from the previous year, according to the bank’s annual report.
China Merchants Bank is the clear leader among the country’s banks for wealth-related business, analysts at Citigroup said in January. In a note to clients, they said it derives a higher proportion of revenues from wealth management and manages a larger pool of assets for individual investors than any of the other banks they cover.
China’s large and rapidly developing asset-management industry holds tremendous opportunities for foreign financial institutions, which hope to tap into the country’s rising affluence. The industry’s assets under management grew 10-fold in the 10 years to end-2019, reaching the equivalent of $16 trillion, according to a report by the World Economic Forum and Oliver Wyman.
J.P. Morgan Asset Management is also seeking full ownership of its fund-management joint venture in China. The firm has agreed with local partner Shanghai International Trust Co. to buy the 51% stake it doesn’t already own, and is awaiting approval from Chinese regulators. JPMorgan has previously obtained majority control of its local securities venture and full ownership of its local futures unit.
Goldman Sachs Group Inc.
is applying for full control of its securities joint venture in China. Both it and
obtained majority control of their securities ventures last year.
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