Blackrock CCB Wealth Management has been granted approval by the China Banking and Insurance Regulatory Commission (CBIRC) to start an asset management business in China, almost nine months after receiving the go-ahead to set up the venture.
The company is 50.1% owned by Blackrock, 40% by CCB Wealth Management — a wholly owned wealth management subsidiary of CCB – and 9.9% by Temasek, the Singapore sovereign wealth fund.
“The wealth management company (WMC) will draw on Blackrock’s expertise in investment and risk management, as well as CCB’s client base and national distribution network to meet Chinese investors’ demand for diversified asset management solutions and support the development of the local wealth and asset management industry,” Blackrock said.
“Temasek will also contribute its experience and strengths to deliver long-term value for the development of the WMC,” it added.
Blackrock, which has around $9trn (£6.5trn, €7.4trn) of AUM, applied to China’s banking authority in July 2020 to form the JV, which will be based in Shanghai.
Blackrock’s China ambitions
The partnership with Temasek and CCB is the latest move by Blackrock to tap into China’s growing private and public funds market, which US consultants McKinsey forecasts will surpass $22trn by 2021.
In January 2018, Blackrock’s wholly foreign-owned enterprise (WFOE) gained a private fund manager (PFM) licence to launch onshore funds to China’s qualified investors — that is, institutions and wealthy individuals
In June 2019, Blackrock’s PFM WFOE received an investment advisory licence from the Asset Management Association of China, which allows it to advise domestic fund management firms and distributors on specific investment products.
The asset manager accelerated its China expansion through applying for a fund management company licence to establish a wholly-owned retail (or public) mutual fund business in China on 1 April 2020, the first day allowed by the Chinese authorities.
The China Securities Regulatory Commission (CSRC) gave Blackrock initial approval shortly afterwards, but the firm had to de-register its private fund management (PFM) unit — which it did in March 2021 — as it prepares to receive a mutual fund licence.
Blackrock also runs two qualified domestic limited partnership (QDLP) funds in China, through Blackrock Overseas Investment Fund Management, which allows it to raise onshore money to invest in offshore securities.
The firm still owns 16.5% of Bank of China Investment Management, part of Bank of China.
“The Chinese market represents a significant opportunity to help meet the long-term goals of investors in China and internationally,” said Laurence Fink, Blackrock’s chairman and chief executive officer.
Reform of wealth management companies
The partnership with Temasek and CCB follows 11 measures introduced by China’s Financial Stability Development Committee in July 2019 to encourage overseas participation in the country’s financial markets. Included were the removal of foreign ownership limits for fund management companies in 2020 and allowing foreign control of domestic WMCs.
France-based asset manager Amundi and BOC Wealth Management, the subsidiary of Bank of China, were the first to gain approval to set up a joint venture under the framework. The entity is 55% owned by Amundi and 45% owned by BOC WM, and launched its product in December 2020.
Subsequently, JP Morgan Asset Management expanded its “strategic partnership” in March 2021 with CMB Wealth Management, the WMC of China Merchant Bank.
Many of China’s banks established wealth subsidiaries in response to regulatory reforms, creating opportunities for western asset managers.
In December 2018, regulators told commercial banks to break implicit guarantees for principal and interest payments on wealth management products (WMP), effectively precluding their wealth management businesses from future bailouts.
The WMP industry has been a foundation of China’s shadow banking system and a major concern of regulators keen to dampen systemic financial risks.
On the other hand, the CBIRC also relaxed the investment criteria of bank wealth management subsidiaries, allowing them to invest directly in stocks, whereas banks were previously forbidden from doing so.
The regulator first granted approval for the wealth management subsidiaries of the six large state-owned banks — Agricultural Bank of China, Bank of China (BOC), Bank of Communications, CCB, Industrial and Commercial Bank of China and the Postal Saving Bank of China.
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