Schroders to link up with Bocom
London-based money manager Schroders plans to establish a mainland fund management venture with Bank of Communications, China's fifth-largest lender.
A source at the bank said an agreement was signed last month and the deal was waiting for central government approval.
Schroders would own a 25 per cent share of the venture, which will probably be established in Beijing with a registered capital of 200 million yuan, the source said.
In April, government financial regulators announced that the Industrial and Commercial Bank of China (ICBC), Bank of Communications and China Construction Bank had been chosen as the first state-owned commercial banks permitted to launch fund management firms.
The government hopes that partnerships with foreign banks will encourage domestic lenders to begin channeling money away from bank deposits and into the ailing equity markets.
The nation's stock markets, which suffer from a shortage of institutional investors, have fallen to eight-year lows this week.
With retail investors wary of losing money on stocks, China's rapid economic growth has translated into a huge accumulation of bank savings deposits.
Credit Suisse First Boston is also awaiting government approval to set up a fund management company with the nation's biggest bank, ICBC, and China Cosco Holdings, the country's largest shipping firm. The proposed joint venture is expected to be the first to gain approval.
Swiss bank UBS won government permission last month to buy 49 per cent of Shenzhen-based China Dragon Fund Management, becoming the first foreign investor to finalise such a deal since the ceiling on foreign ownership was raised from 33 per cent in December.
JP Morgan, Fortis and Amvescap, Europe's largest publicly traded money manager, have also all set up joint-venture fund management companies in China.
The country's fund industry is now estimated at 300 billion yuan and is expected to grow rapidly as capital market reforms continue to be implemented.
