BNY Mellon Asset Servicing has won a mandate to provide overseas custodial services to Fortune SGAM Fund Management's first QDII fund in China.

The bank snapped up the mandate after a competitive pitch which reportedly included rivals Citi, JPMorgan, Northern Trust and HSBC.

Chinese financial institutions last year received approval to invest overseas through a quota system, known as the Qualified Domestic Institutional Investor scheme (QDII). The scheme enables Chinese investors, fund managers, banks and insurance companies to buy bonds and shares on the international markets using foreign currencies.

This in turn spells new opportunities for the large global custodian banks.

"In China the growth in QDII and the increasing ability of the insurance segment to invest overseas are the two biggest growth opportunities for global custodian banks," says Chong Jin Leow, head of Asia at BNY Mellon Asset Servicing.

The challenge for firms like BNY Mellon is to "fine tune the process", says Chong, because it is working with both the joint venture fund management company and the local bank that is acting in the capacity of a global custodian. For one, this results in double reporting requirements, he notes.

The CCB Fortune SG overseas growth equity QDII fund will invest in Hong Kong, Singapore, the UK and the US, and will be distributed in China through China Construction Bank, the bank said.

"A lot of the uptake of QDII funds depends on market sentiment. Out of the six QDII funds so far launched we have been appointed to service three of them, including two appointments from ICBC to service China Southern Fund Management and China International Funds Management," Leow adds.

Experts say China plans to use increased overseas investment flows to slow the growth of its gargantuan foreign exchange reserves.

Fortune SGAM Fund Management is a joint venture between China's Baosteel and SociTtT GTnTrale Asset Management, and is one of the first joint ventures between a domestic Chinese trust company and a foreign asset management company with assets under management of close to $10 billion.

Bank of New York Mellon has over $23 trillion in assets under custody and administration, more than $1.1 trillion in assets under management and services $12 trillion in outstanding debt.