SHANGHAI--China will allow a wider range of companies, including
foreign banks, to distribute products from local mutual fund
managers from June 1, a long-anticipated move that will give
foreign lenders access to a lucrative and growing market.
Under amended rules on the distribution of securities investment
funds released Friday, the China Securities Regulatory Commission
said it will permit commercial banks, including foreign banks, that
have no record of "significant administrative or criminal
penalties" in the last three consecutive years to sell mutual funds
to investors in China.
The new rules will give foreign lenders entry into a
fast-growing niche in the world's second-largest economy. China's
72 fund-management companies managed 3.62 trillion yuan ($575.8
billion) as of the end of last year, 31% more than a year
earlier.
China currently requires commercial banks to have a record clean
of "administrative or criminal penalties" for three consecutive
years, a requirement that none of the foreign banks in China would
be able to meet.
Following the change, major foreign banks will be eligible to
apply for licenses to conduct the business.
The release by the CSRC came after a person with direct
knowledge of the matter told Dow Jones Newswires last month that
China's securities regulator is expected to soon unveil amended
rules to effectively make foreign banks eligible to tap the
domestic fund distribution market.
The latest statement from the Shanghai Branch of the CSRC showed
that it has received five foreign lenders' applications for the
license as of March 11. The applicants are Standard Chartered PLC
(STAN.LN), United Overseas Bank Ltd. (U11.SG), Citigroup Inc.'s (C)
Citibank, Bank of East Asia (0023.HK), and Hang Seng Bank
(0011.HK).
The new rules also pave the way for local futures companies and
insurance companies to distribute mutual funds for fund management
companies, a market currently is dominated by local banks.
In a bid to introduce more competition into the market, the
securities regulator has in recent years brought in more players,
including independent fund sale institutions.
The release by the CSRC came two days prior to an appointment of
Bank of China Ltd. Chairman Xiao Gang as the new head of the CSRC,
succeeding Guo Shuqing.
Write to Amy Li at amy.li@dowjones.com
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