Member Article

China presents enormous opportunities for the wealth management industry, as the domestic financial market and players develop increasing sophistication. The financial regulators in China are pushing ahead with financial market reforms and regulations, across the equity and bond markets, over banks, insurance companies, securities companies, securities investment fund management companies, trust investment companies and other financial institutions. The Qualified Foreign Institutional Investors Scheme was introduced in 2002 and has attracted significant interest. While the much anticipated “Qualified Domestic Institutional Investors Scheme” has not yet been introduced, PRC insurance companies are now allowed to invest their foreign currency funds overseas, and the National Social Security Fund may also invest offshore, in both case by appointing offshore fund managers. Depending on the nature of the China business intended to be conducted, it may or may not be necessary for a foreign player to establish an actual presence in the PRC in order to participate in the market. For instance, foreign investment managers or consultants may provide consulting and advisory services to institutional investors from their home base. Individuals may travel to China for market investigation, marketing and meetings without setting up an office, provided that the activities carried out in China do not amount to operating a business in China. However, through a representative office in China, a player should be better placed to conduct on the ground research on the market and domestic companies, as well as building valuable contacts with the local industry and prospects. The establishment of a representative office in China for fund management business is subject to regulation by the China Securities Regulatory Commission (CSRC) under the “Administrative Measures on Representative Offices in China of Foreign Securities Related Enterprises” and the establishment of a representative office in China of a bank or other financial institutions is subject to regulation by the China Banking Regulatory Commission (CBRC) under the “Administrative Measures on Representatives in China of Foreign-Funded Financial Institutions”. Global financial conglomerates with business lines in both asset management and banking may wish to set up one representative office for both its asset management and banking businesses. The permitted scope of activities of a representative office include liaison with potential Chinese customers, hosting of delegates from the head office, liaison with PRC governmental organisations, collection of data and market surveys, promotion of the foreign entity’s trade name, market research and business development, and other business activities approved by the CSRC or the CBRC as the case may be. For more information about the landscape and players in the China wealth management industry, visit our website: deacons.com.hk for a full report.