Even as the US-China trade war rumbles on and some in Washington are pushing for a pivot of investment away from China, American asset managers continue to add resources in Shanghai.

Bond fund giant Pimco is the latest to install a head for its newly established onshore business, a spokeswoman confirmed to AsianInvestor.

Zhou Lingling started as general manager of the investment management wholly foreign-owned entity (IM WFOE) in Shanghai on September 4. She was previously deputy GM of JP Morgan Asset Management’s own local unit in Shanghai.

Zhou reports to Yin Haining, Hong Kong-based head of Greater China at Pimco, which has around $1.8 trillion of assets under management.

Pimco set up the IM WFOE last year, the spokeswoman said, declining to provide a specific date. As a result, she added, it can now apply for regulatory approval to establish other asset management businesses and distribution operations onshore.

“We will continue to look to invest in target resources and ensure we are well positioned as we progress with our China plan,” she added. 

She declined to comment on whether Pimco had applied for a private fund management licence, which would allow it to manage and sell products onshore to institutional and wealthy clients.

This latest move in China follows the firm's move last year to establish an operation in Taiwan, underling its ambitiions to expand in Asia.

CHINA BOND FOCUS

Pimco, which is owned by German insurer Allianz, has been planning to set up an onshore presence in China for at least three years. Eric Mogelof, Pimco’s then head of Asia Pacific, had said in September 2016 that he expected to have a local unit in place by 2018, with a focus on accessing the country’s huge bond market.

Investors – such as the $67 billion Alaska Permanent Fund – are increasingly looking at buying renminbi debt either directly or via fund managers as Beijing steadily opens up the market.

Having a team on the ground will likely strengthen Pimco’s credentials in the Chinese bond space when it comes to investing on behalf of both mainland and global clients, including Allianz.

The access channels now include the Bond Connect scheme, the China interbank bond market, and the qualified foreign institutional investor (QFII) scheme. Beijing eliminated the QFII/RQFII quota system this month.

And inflows are set to ramp up now that both the Bloomberg Barclays Global Aggregate and JP Morgan’s emerging market bond indices are starting to include China. The former began doing so in April and the latter will start the phasing in process on February 28 next year, it announced this month.

Next up is FTSE Russell, which is slated to announce its decision regarding its World Government Bond Index this week, on September 26, according to Bloomberg.

JP MORGAN CHANGES

Meanwhile, JP Morgan AM internally promoted Rainy Lei to replace Zhou in August, a spokeswoman said. Lei focuses on advising clients as well as on government and regulatory collaboration, she added.

Rainy Lei

Lei was previously vice president and China business manager for global corporate banking at JP Morgan in Shanghai. Before that she spent nearly six years as a business manager on the global liquidity team in Asia at JP Morgan AM.

Desiree Wang remains general manager of the WFOE and head of asset management for China.

While Pimco’s new IM WFOE is currently its only onshore presence in China, JP Morgan AM has a local joint venture, of which it should soon hold majority control.  

On August 6, JP Morgan said it won an auction to buy a 2% equity stake in China International Fund Management. The deal would raise the US firm’s stake to 51%, contingent on regulatory approval.

Under rule changes unveiled in 2017, foreign asset managers were allowed to own up to 51% of their Chinese mutual fund ventures. Beijing later said foreign ownership caps would be removed by 2020, a year earlier than scheduled.