Foreign Managers Head into Chinese Unknown

Financial News, June 30, 2002 | Go to article overview

Foreign Managers Head into Chinese Unknown


Byline: Ben Wright

China has this week opened its doors to Western fund managers for the first time. New legislation is allowing foreign investment firms to take up to a 33% stake in domestic players.No one doubts that the country offers vast potential, but foreign fund managers that have been stalking would-be partners for the past two years are finding that joint ventures are not going as smoothly as planned.One China investment consultant says: 'There has been a lot of enthusiasm from Western fund managers over getting into China, but I think that they are now running into difficulties. Fidelity has explicitly said that it is not interested in getting into China until the country has opened up far more.'The most recent player to jump on the joint venture bandwagon is Allianz Dresdner Asset Management. Last week, the company's chief executive Joachim Faber signed an agreement with Guotai Jun'an Securities.Last week, Scandia signed an agreement with Beijing state-owned Asset Management Corporation for a life assurance JV.The Chinese are viewing the entry of foreign expertise with excitement. They hope that the arrival of Western fund managers will go some way to rectifying the inefficiency of the country's capital markets.Zhu Li, president of China Galaxy Securities which has signed a memorandum of understanding with Schroders, says: 'Fund management is a young industry with a great future in China. 'As a late-comer, there is a significant gap between domestic Chinese and international standards. We hope that through our co-operation with Schroders, we will benefit from their international experience and fund management skills.' The appeal of China for foreign fund managers does not take long to comprehend. Personal savings in China are estimated to add up to roughly $800bn ([euro];824bn) and almost all of that is held in bank accounts. But there are pitfalls, because the country has a poor corporate governance record.

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