Beijing-based China Securities is searching for a foreign partner to create a joint venture in asset management. It is looking for a long-term partner that would be willing to share management responsibility for a funds JV, as well as expertise, allowing the firm to boost its overall competitive advantage, says Jeffrey Tang, deputy general manager of the international business division in Shanghai.
"We have had discussions with some US companies, but they were very aggressive and wanted to keep all the senior management positions in the JV," Tang says.
The firm has recently restructured in order to clear a path for an asset management JV. China Securities used to be the main shareholder in Huaxia Fund Management in Beijing. Recent regulatory changes stipulate that securities companies may not have a majority stake in more than one asset management company, and may only have stakes in two. This prompted China Securities to sell its Huaxia stake in February to the Beijing municipal government.
Beijing city, however, also happens to be a shareholder of China Securities as well, so Huaxia has become a sister company.
Moreover, a recent capital-raising exercise saw China Securities issue new shares to the Beijing municipal government and increase its paid-in capital from Rmb1.35 billion to Rmb2.7 billion. This now makes the city government the principal shareholder, owning 40% of China Securities, and also prompted some reshuffling of senior executives at the brokerage. China Securities can claim close relations with the China Securities Regulatory Commission but is still broadening its network of overseas contacts.
China Securities has an existing asset management business offshore in Hong Kong as investment advisor to Skandia Global Funds' China Mainland Equity Fund, an arm of Skandia's sub-advisory Skandia Select fund. "We do everything except the marketing," says Tang, who adds the sub-fund is evaluated by Morningstar and requires China Securities to conduct roadshows in Europe to explain their management techniques. China Securities has also provided investment expertise to Zurich Financial Group.
Moreover its subsidiary, China Enterprises Investment Management (CEIM), is the first offshore Sino-foreign JV investment company approved by the People's Bank of China. Established in 1994 in Hong Kong, CEIM invests directly in Chinese enterprises and projects, and its fund is listed in Dublin.
Despite these achievements, China Securities' senior management is aware that as foreign competitors gradually enter the mainland under China's accession agreement with the World Trade Organization, the firm needs to upgrade its skills and technology in order to remain a top player. Although it is looking for a partner in the asset management field, the firm is open to deals with financial institutions at a broader level. With 130 retail outlets and close relations with domestic companies and regulators, China Securities feels it has something to offer.