A foreign asset management company can now do business in China after the country's financial regulatory body approved its first business license, a statement released by the company said on Tuesday, Sept. 6.
The Global Times reported that J.P. Morgan has been issued a 20-year license registered in Shanghai's free trade zone, which will allow the company's broad range of asset and investment management services, including consulting.
In a statement issued by J.P. Morgan Asset Management (JPMAM), the company said that the Market Supervision Administration of China (Shanghai) Pilot Free Trade Zone issued the business license to the company, permitting it to incorporate JPMorgan Asset Management (Shanghai) Limited, an entity that will be wholly owned by J.P. Morgan in China.
According to the company, JPMAM is the first asset management company to receive approval from government and allowed to establish an asset management wholly foreign-owned enterprise (AM WFOE) in Shanghai.
This year, the Chinese government eased restrictions on foreign investments in the bond market, similarly allowing global fund managers to buy indirectly shares on the Shanghai Stock Exchange. In July, China also approved a plan that allows indirect investors to the Shenzhen stock exchange.
But experts said that the government is still cautious on issuing licenses in the future.
"The JPMAM case is an individual one, and it would be hard to find another case like this in the short term, given the fact that China has still not opened its capital market to foreign institutions," a source close to the regulatory board told Beijing-based media outlet Caixin.
JPMAM has been doing business in China for a long time. The company has participated in MRF3, QDII2, QFII4, RQFII5, and Shanghai-Hong Kong Stock Connect. It also formed a joint venture with China International Fund Management Co., Ltd. and Shanghai International Trust Co. Ltd.
Desiree Wang, JPMAM's head of China, will be the legal representative of the AM WFOE, the statement said.
In an interview with Caixin in June, Wang said that more Chinese investors have been motivated to seek asset allocation abroad when the exchange rate of the yuan became volatile after the stock market crash and reforms in the exchange rate implemented in Aug. 2015.
Chinese investors deal overseas through QDII and Hong Kong, and mainland mutual recognition of funds, which was introduced in July 2015.
Wang expects Chinese investors to raise their overseas allocation to 5 to 10 percent as QDII assets account for less than 1 percent of the gross asset size in the country.
QDII was introduced in 2007 in response to a high point of the capital market as the project was severely affected by the financial crisis, Wang said. Though it is popular among investors, the project has been limited to short-term undertakings, and no new quota is set to be released.
But the China Securities Regulatory Commission (CSRC) is likely to approve some funds on the MRF list. Wang said that only four funds out of the 18 application were approved by the CSRC and two of them were from JPMAM.
Wang added that the JPMAM will help clients diversify their assets allocation through a "solution group" it has formed.