After a decade-long, low-profile presence through its representative office in China, Taiwanese monolith Fubon Financial Group has scored a notable success. Through its securities-brokerage arm, Fubon is setting up an asset-management joint venture with Founder Securities in Beijing.

Founder will own two-thirds of the shares of the new entity and Fubon one-third. The two companies will contribute total capital of Rmb200 million ($29 million) for the JV's set-up in the initial stage -- cheap in comparison to the €105 million ($141.3 million) Manulife paid BNP Paribas for its 49% stake in ABN Amro Teda in November.

Fubon chief executive Victor Kung has told the press his firm will raise its stake in the JV to 49% in two years' time. Each company will have the power to appoint half the executive and non-executive directors onto the JV's board.

The deal with Founder marks a second cross-strait asset-management agreement by a Taiwanese company. Early this month, President Securities Corp inked an asset-management JV deal with Union Trust, a restructured trust company hailing from China's Fujian province, just across the strait from Taipei.

Such deals attest to further progress on the normalisation in trade and financial relations between China and Taiwan. Previously, Taiwanese insurers have also managed to set up insurance JV deals in China. Cathay Life runs a successful insurance JV with China's Eastern Airlines and Shin Kong Life has one with Hainan Airlines. Fubon itself also has a property-insurance JV -- the group is now eyeing a life JV set-up. Hence, China's banking sector is the last hold-out yet to be penetrated by Taiwan's deep-pocketed financial holdings.

Fubon's deal with Founder is certainly a coup worth celebrating. There are advantages in language and culture that may help it run a JV more successfully than most of its American or European counterparts doing the same thing in China. Over the years, Western firms have had well publicised fall-outs with their Chinese partners -- over issues ranging from big strategic company decisions to more micro issues about how products should be marketed or distributed.

Furthermore, Taiwanese fund-management houses are accustomed to their ultra-volatile local equities market as well as restrictive regulations and tough handling by domestic securities regulators -- all qualities that define China's industry today. Many peculiarities and struggles experienced during the development of China's asset-management industry have mirrored those in Taiwan. (Remember: Fund splitting, the Rmb1 NAV obsession, abnormally high-dividend equities funds.) And here, a bit of Taiwanese sales or investment management wisdom could definitely apply.

Despite these advantages, however, Fubon will need to be ready for a different playing field in China compared to the cushy business environment back home. And before that, it also needs to psyche itself up for what may turn out to be a very long wait for a business licence from the China Securities Regulatory Commission.

Despite expectations that the CSRC will revive the approval process for new asset-management licences this year, the regulator is still running a very long backlog of regulatory approvals for deals signed since 2006. These include BNY Mellon's proposed JV with Western Securities, Ping An's with Singapore's UOB, Bank of Beijing's with Bank of Nova Scotia, and Huaxia Bank's with F&C. Fubon will have to wait its turn, unless the Chinese government has political interest in prioritising Taiwanese applications.

And even after it has gained approval, Fubon will need to be able to break into the ranks of onshore managers, where concentration in market share is increasing year by year. Based on data provided by Z-Ben Advisors for 2009, at the top end, the biggest three players account for over one-fifth (21.7%) of all market share, the top 10 players account for 50.1% and the biggest 20 own 72.3% of the market.

That leaves the remaining 40 companies with just 27.7% to share. In particular, the bottom 10 account for just 1.6% of the market. And the situation is being exacerbated every year, as the biggest firms compound in size and gain better economies of scale.

In China, the new Fubon JV will at least enjoy some degree of patronage by its Chinese shareholder, Founder Securities. Founder's branch networks are centred in the manufacturing region of China's midwest, with Hunan and Zhejiang provinces its strongholds.

But it has just 81 branches -- with hardly any penetration of the deep pockets in tier-one cities, such as Beijing, Shanghai, Guangzhou or Shenzhen. Meanwhile, Founder has a separate securities JV with Credit Suisse, which was licensed by the CSRC in December 2008.

Once operational, the new fund JV will have to wait for further approval by the CSRC for licences to set up, distribute and sell funds or score segregated accounts, QDII quotas or QFII quotas. Its products will not enjoy the same guaranteed product shelf space as the Fubon securities investment trust enterprise (Site, local parlance for a fund house) enjoys in Taiwan.

In China, the JV will need to convince the big national, provincial and city banks to sell its products, before it can court other brokerages that may be viewed as rivals to its parent companies, or to China's lone investment adviser set-up, Tianxian Securities. There are 35 banks with licences to distribute funds, while the number of brokerages with that qualification totals 86.

This picture will be vastly different from the one back home.

In Taiwan, Fubon Site is rarely a top player in any category by investment performance. However, thanks to the distributing prowess of its parent shareholder, the fund house is the 12th largest on the island based on end-of-February AUM numbers of NT$80.29 billion ($2.52 billion).

Fubon's funds are also backed by the machinery of the island's second largest brokerage, Fubon Securities, with 6% of local market share; the island's second largest insurer, Fubon Life, which swallowed the old number four, ING Life, in 2008; and that's not to mention the huge Taipei Fubon Bank. All three businesses are among the largest in their respective fields, thus guaranteeing Fubon Site top-shelf space in their local branches, irrespective of its investment performance.

Now that Fubon has clinched a deal for the intention to set up on the other side of the strait, a long hard march into China awaits.