Chinese regulators have granted a domestic fund custody licence to Citigroup, making it the first American bank to receive one after mainland regulators tweaked the rules this year to further open up the country’s mutual funds sector.
Rule changes by the China Securities Regulatory Commission and the China Banking and Insurance Regulatory Commission this year allowed local branches of foreign banks to apply for fund custody licences for the first time.
This licence granted by the CSRC lets Citibank (China) provide custody-related services to both mutual funds and private funds domiciled in China after passing an on-site inspection later this year.
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“Citi’s China domestic fund custody licence is great news for our global clients,” David Russell, Citi’s Asia-Pacific head of securities services, said in a statement. “As international fund managers, securities firms, and insurance companies set up in China, we believe they will want a trusted service provider to help them mitigate risks and reduce costs.”
Standard Chartered was the first foreign bank to receive a domestic fund custody licence in 2018 under prior rules that allowed local subsidiaries to apply for such licences.
Worsening relations between Washington and Beijing this year have done little to diminish the appetite of foreign financial institutions as they seek to tap the growing onshore wealth of the Chinese middle class.
Banks, insurers and asset managers are scrambling to take control of their joint ventures in China this year after Beijing relaxed rules on the foreign ownership of financial services firms, which came earlier than expected.
Since April 1, global fund companies have been able to apply to the CSRC for approval to buy 100 per cent stakes in fund management joint ventures, which would allow them to create and distribute mutual funds for the US$2.3 trillion retail investor market in China.
JP Morgan Asset Management won an auction last month to take majority control of its onshore asset management joint venture, while the likes of Credit Suisse, Goldman Sachs and Morgan Stanley have moved to take majority control of their securities joint ventures this year.
HSBC said in August that it plans to hire between 2,000 and 3,000 wealth planners in China within the next four years as it looks to tap into growing incomes in the mainland, particularly in the Greater Bay Area.
Vanguard, the world’s second-largest asset manager after BlackRock, said last week it would close its Hong Kong and Japan offices and move its primary regional office to Shanghai as it shifts its focus in Asia to mainland China.
BlackRock received approval last week to set up its own wholly-owned mutual fund business in Shanghai.
More from South China Morning Post:
- Credit Suisse takes control of China securities joint venture
- HSBC to take full control of its Chinese life insurance joint venture
This article US banking giant Citigroup granted custody licence in China as mainland fund sector further opens up first appeared on South China Morning Post