JPMorgan in Talks With China Bank on Wealth Venture

(Bloomberg) -- JPMorgan Chase & Co. is seeking to establish another Chinese joint venture in wealth management as the nation’s financial opening has spurred a rush by global banks to capture a piece of a market that is estimated to grow to as much as $30 trillion in 2023.

The U.S. bank is in preliminary talks with China Merchants Bank Co. to set up an entity, expanding on a strategic partnership on products in 2019, said people familiar with the discussions, who asked not to be identified as the matter is private. While the two parties haven’t yet hammered out ownership details, JPMorgan is unlikely to have control, said the people.

Global financial firms are rushing to capitalize on China’s opening of its $53 trillion financial industry, with the likes of JPMorgan, Goldman Sachs Group Inc. and UBS Group AG adding staff and expanding their footprint in everything from futures and brokerages to asset management. Most foreign financial institutions have identified wealth management as a prime focus with investable assets estimated to double over the next few years.

The plan is subject to change and talks could still fall apart, the people said. JPMorgan Asset Management declined to comment. China Merchants Bank didn’t respond to a request seeking a comment.

JPMorgan has already gained majority ownership of a mutual fund management venture -- China International Fund Management -- and plans to pay at least $1 billion to buy out the remaining 49% from its partner. A new partnership with Merchants Bank, which operates China’s largest private bank and known as the nation’s “king of retail banking,” would significantly boost JPMorgan’s distribution network and client base.

Shenzhen-based Merchants Bank had 155 million retail banking clients by the end of September, with 8.6 trillion yuan ($1.3 trillion) under management. Its private banking client assets rose 19% to 2.7 trillion yuan in the first nine months of last year.

Under new regulations introduced last year, foreign firms can take full control of their mutual fund joint ventures in China with the approval from the securities regulator, or seek partnerships with a local banks to increase offerings. More than 40 overseas companies have set up joint-ventures and some have applied for greater control.

Amundi SA in December 2019 became the first foreign firm to be allowed to take control of a wealth management venture. Europe’s largest fund manager will own 55% of a Shanghai-based company with Bank of China’s wealth-management arm holding the rest. BlackRock Inc. and Temasek Holdings Pte have won approval start an asset-management business in China along with China Construction Bank, while Goldman Sachs is in talks with Industrial & Commercial Bank of China Ltd. to set up a similar venture.

JPMorgan Chief Executive Officer Jamie Dimon has said that his firm is committed to bringing its “full force” to China. The bank in October raised ownership in its Chinese securities joint venture to 71% from the current 51%. It has also obtained full control of a futures unit in China.

©2021 Bloomberg L.P.

With assistance from Bloomberg