JPM JP Morgan Chase and Co

By Stella Yifan Xie 

JPMorgan Chase & Co. said it plans to assume majority ownership of its Chinese fund-management joint venture, its latest step toward establishing a firmer foothold in China after Beijing recently relaxed its rules for foreign ownership of financial firms.

The U.S. bank on Monday said its asset-management arm is hoping to increase its ownership of China International Fund Management Co.--a mutual-fund joint venture in which JPMorgan has owned a minority stake since 2004--to 51% from 49% currently. The bank hasn't yet formally applied to do so.

Last Thursday, JPMorgan's brokerage unit submitted an application to Chinese regulators to acquire a 51% stake in a new securities joint venture.

"Our investment in China is a commitment to bring the full force of JPMorgan Chase and our resources to the country," James Dimon, the bank's chairman and chief executive, said in a statement.

If successful, the move would make JPMorgan the first Western financial institution to majority-own a fund-management arm able to sell mutual funds to Chinese customers. Hong Kong-based Hang Seng Bank Ltd. was allowed to set up a fund-management arm in China in 2016, in which it owns a 70% stake.

China's securities regulator in April released guidelines permitting foreign companies to control 51% of local securities, asset-management and insurance joint ventures, part of its yearslong efforts to open up the country's financial sector. The shareholding restriction for foreign financial firms is set to be lifted completely in three years.

Other foreign banks such as Switzerland's UBS Group AG and Japan's Nomura Holdings Inc. have said they are looking to take controlling stakes in their local securities-brokerage joint ventures.

The latest applications by JPMorgan will pave the way for it to operate independently in both securities-brokerage and asset-management sectors; its first China joint venture only allowed the bank to perform investment-banking business, said Shichen Liu, a senior analyst at Z-Ben Advisors.

JPMorgan currently owns 49% of its Chinese fund-management joint venture: Shanghai International Trust Co., a subsidiary of Shanghai Pudong Development Bank, owns the rest. The joint venture manages 147 billion yuan ($23.2 billion) in mutual funds, according to Z-Ben.

JPMorgan's desire to increase its stake in China International is subject to agreement with the local partner and authorities, the bank said in its statement.

In 2011, the New York-based bank established a Chinese onshore investment-banking joint venture, in which it held a 33% stake, with Shenzhen-based First Capital Securities Co., but transferred the stake back to First Capital five years later.

The U.S. bank said it had also appointed Mark Leung, a veteran who has worked with the firm for more than two decades, to be its new China chief executive.

Foreign banks and fund managers have made strides to enter China's wealth-management and brokerage industries following Beijing's promise to further open its financial industry.

China's mutual-fund industry swelled to a fresh high of 12.4 trillion yuan in funds under management as of the end of March, propelled by rapid growth in money-market funds, according to data from Asset Management Association of China.

China has around a dozen joint-venture brokerages, with foreign banks such as Morgan Stanley, Credit Suisse AG and Deutsche Bank AG holding minority stakes. Foreign firms currently hold minority stakes in 45 out of 116 mutual-fund firms in China by end of March, according to AMAC.

Write to Stella Yifan Xie at stella.xie@wsj.com

(END) Dow Jones Newswires

May 14, 2018 07:08 ET (11:08 GMT)

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