BLK BlackRock Inc

By Dawn Lim and Stella Yifan Xie 

BlackRock Inc. got approval from regulators to start a mutual-fund business in China, a milestone for an investment firm with fierce ambitions in the world's second-largest economy.

The New York asset manager was given the green light to set up a wholly-owned mutual-fund business in Shanghai, the China Securities Regulatory Commission disclosed late this week. This paves the way for the world's largest asset manager to be one of the first--if not the first--foreign investment firms to start managing money for Chinese individuals.

The move comes as senior U.S. and Chinese officials this week said they were committed to carrying out the phase-one trade accord between the two nations. The deal, signed in January, included terms that granted financial institutions more access to China.

"BlackRock has received regulatory approval to advance our establishment of a fund management company in China," a spokeswoman said, "through which we will provide Chinese investors with differentiated solutions to help them achieve their long-term financial goals."

BlackRock, which manages some $7.3 trillion, has had a presence in China for more than a decade. It was among the first foreign asset managers to set up wholly foreign-owned operations in Shanghai in 2017. The company began selling private funds to high-net-worth investors based in mainland China the following year. It manages three onshore private funds.

But, like other foreign firms, it was barred from independently accessing China's vast market of mom and pop investors and couldn't break into the country's mutual-fund industry without forming partnership with local firms until authorities loosened rules on foreign ownership of investment businesses.

This year, Chinese regulators allowed foreign asset managers to apply for mutual-fund licenses by scrapping foreign ownership limits on mutual-funds companies. Neuberger Berman and Fidelity International also applied.

Even as trade tensions between China and the U.S. have risen in recent years, BlackRock Chief Executive Larry Fink and the firm's top executives earmarked China as a priority. The firm held talks with different potential Chinese partners in an attempt to expand further in China. The China Banking and Insurance Regulatory Commission recently cleared the way for BlackRock to work toward a joint venture with China Construction Bank Corp. and Singapore's Temasek Holdings.

"I continue to firmly believe China will be one of the biggest opportunities for BlackRock over the long term, both for asset managers and investors, despite the uncertainty and decoupling of global systems we're seeing today," Mr. Fink said in a letter to the firm's shareholders earlier this year.

Traditional asset managers in China are projected to manage about 90 trillion yuan (about $13 trillion) in assets by 2023, according to consulting firm Oliver Wyman. As of July 2020, there were more than 140 Chinese mutual-fund managers, overseeing more than 17 trillion yuan in assets, according to the Asset Management Association of China.

Peter Alexander, managing director of Shanghai-based consulting firm Z-Ben Advisors, said the latest approval BlackRock received for a mutual-fund business was "a key initial step."

"The next challenge will be whether they are going to be adaptive enough to compete locally," he added.

Write to Dawn Lim at dawn.lim@wsj.com and Stella Yifan Xie at stella.xie@wsj.com

(END) Dow Jones Newswires

August 29, 2020 04:05 ET (08:05 GMT)

BlackRock (NYSE:BLK)
Historical Stock Chart
From Mar 2024 to Apr 2024

BlackRock (NYSE:BLK)
Historical Stock Chart
From Apr 2023 to Apr 2024