Undismayed by the mainland's turbulent stock markets, international fund management companies are rushing to set up shop in China. They will find it hard going. At the end of June, there were 15 partly foreign-owned companies in China managing mutual funds. Most were joint ventures between foreign financial services firms and Chinese partners, with two direct foreign investments in domestic managers. More foreign companies are entering the market all the time. Last month, a joint venture between local banking giant ICBC and Credit Suisse raised more than four billion yuan in its debut fund launch. Earlier this month, British life insurer Prudential announced it had won regulatory approval to set up a fund management joint venture with Citic, and HSBC Asset Management expects to receive a licence for its proposed tie-up with Shanxi Trust and Investment before the end of the year. Other foreign asset managers are sniffing around for partners as well. All are attracted by the potential for raking in heaps of cash from China's savers, who currently keep almost all their money - over 28 trillion yuan - in bank deposits, typically earning an interest rate of just 2.25 per cent. On the surface, mutual funds in China look like a good proposition. The industry is growing fast. According to Peter Alexander, of Shanghai-based consultancy Z-Ben Advisors, total assets under management increased more than 30 per cent in the first half of the year, hitting 434 billion yuan. Despite that, foreign-invested joint ventures are finding asset gathering more difficult than they thought. According to Shiv Taneja at consultancy Cerulli Associates, foreign-invested joint ventures lost market share in the 12 months to the end of June with their proportion of total assets under management declining to 22 per cent from 30 per cent. Some firms saw their assets under management drop. Part of the problem is the lousy performance of China's stock markets. Although the Shanghai Composite Index has risen from its July low, it is down 8 per cent over the year to date and remains far below its 2001 peak. The foreign-invested firms, which mostly specialise in equity investment, are finding it hard to persuade Chinese savers to invest in stock market funds. Meanwhile, many of the domestically-owned companies have concentrated on rolling out money market funds, which have proved a popular alternative to low-yielding deposits. Meanwhile, the competition is set to stiffen as state banks, which dominate the fund distribution networks, set up their own fund management subsidiaries and insurance companies enter the fray. At the same time, the joint ventures are plagued by management problems and tensions between the different shareholders, says Mr Taneja. 'The joint ventures in China are going to go through a rough patch for the next four to five years,' he says, warning a shake-out is inevitable. Blair Pickerell, chief executive for the Asia-Pacific region at HSBC Asset Management, is optimistic, however, pointing out that it took many years of dogged hard work to develop successful mutual fund sectors in other Asian markets including Hong Kong and Taiwan. China will need the same perseverance. 'Nobody's under the delusion that this is an industry that will make money in the short or medium term,' he says.