Shanghai-based Z-Ben Advisors, in a new report on fund distribution in China, argues that over the past few years, open architecture has become the norm among the major distributor banks.

Funds distribution in China tends to face bottlenecks, because a handful of banks have the national network that can turn a fund launch into a success. When banks began selling funds, they tended to do so in order to boost the funds under custody, because custody fees were high. Sales commissions on investment products were secondary.

However, since the funds industry began to boom starting in 2005, banks have been increasingly ready to sell funds on a third-party basis.

The two biggest distributors are China Construction Bank and ICBC, and they have also been at the forefront of open architecture.

CCB has been the most aggressive about putting third-party funds (ie those for which it has no custody business) on its shelf. In 2005, 78% of the funds it sold were also funds for which it provided custody. By 2008, it was providing custody for only 59% of the funds on its shelf.

ICBC provided custody for 82% of the funds it sold in 2005, but by 2008, that figure had fallen to 59% as well. In ICBC's case, this is a new initiative; only last year did it make an active effort to attract third-party products. But it has now caught up with CCB and Z-Ben expects other banks to follow.

Another example: when Huaan Fund Management launched the nation's first open-ended mutual fund, it was sold via a single bank. Today that same fund is carried by 17 banks.

So while the same old bottlenecks exist, the reason for it has changed. Whereas it used to be because the big banks would only sell a fund if it was also getting the custody business, today the market is open and competitive - and it happens to be the same few banks that are seen as most attractive to manufacturers.

"All asset managers, foreign and domestic alike, look to ICBC and CCB because they are the strongest in fund raising," says Peter Alexander, principle at Z-Ben. "Like John Dillinger said when asked why he robs banks: 'Because that's where the money is.'"