Very recently, JP Morgan Fleming Asset Management, who having
worked closely with Hua An Fund Management Co. in the last two
years, established a joint working committee with Hua An in
Shanghai to pave the way for setting up a joint venture fund
Currently, 14 Chinese securities brokerage firms or
fund management firms have secured foreign strategic partners to
co-operate in fund management business. During the last couple of
years, the cooperation efforts by Chinese and foreign partners have
focused on technical support and consultancy covering middle and
long-term strategies, corporate governance principles and risk
control mechanisms. Many foreign companies have been involved in
negotiations to form joint venture fund management firms.
This January, CSRC, the securities market
regulator, issued an Opinion on Fund Management Companies Carrying
out Foreign Technology Cooperation ("Opinion") for the purpose of
facilitating fund management companies' use of experience and
advanced technologies from the more mature overseas fund markets.
The Opinion encourages an evaluation from foreign cooperative
partners on corporate governance, corporate internal control and
risk management mechanisms, and evaluations of such documents as
Fund Establishment Contracts, Fund Prospectuses and Articles of
Association, and the documents to be attached to application
materials when application materials for establishing funds or
establishing fund management companies are submitted for
WTO liberalisation on fund management
Foreign firms are now permitted to hold up to
33.33% of a joint venture managing securities as of China's
accession to the WTO and up to 49% interest has been promised
within three years after accession.
The CSRC has been working on joint venture
securities investment fund management provisions that will serve as
the guidelines for foreign participation in this industry in the
Foreign participation in venture capital
Foreign investors have permitted to establish
locally based funds. The Ministry of Foreign Trade and Economic
Cooperation (MOFTEC), the Ministry of Science and Technology and
the State Administration for Industry and Commerce issued a notice
announcing that foreign companies would be allowed to set up wholly
owned or Sino-foreign cooperative venture capital firms in China.
Although foreign exchange balancing cannot be required following
WTO accession, the question of re-patriation of profits remains.
According to the notice, foreign-invested venture capital firms
will be able to withdraw their capital through share transfers,
buybacks or selling their shares in the company if and when it
becomes listed on a domestic or overseas stock market.
Before applying to set up wholly owned or
Sino-foreign cooperative venture capital firms in China, at least
one of the foreign investors must have managed assets of over
USD$100 million in total and invested over $50 million of these
assets in the past three years and own at least 3% of the new
firm's capital. On top of that, one foreign investor must have more
than $100 million in net assets and must agree to put at least $20
million in the new venture in China.
For further information on this please contact
Luke Filei on firstname.lastname@example.org or +86 10 6590 0389 in
Beijing or +86 21 6289 6363 in Shanghai.