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Moves aim to turn Shanghai into a global center for asset management

Aerial photo taken on Oct 15, 2019 shows a view of the Lujiazui area in Shanghai. [Photo/Xinhua]

Shanghai is moving to become a world hub for asset management while regulators make continued efforts to improve the business environment. The moves come amid growing interest by industry leaders in expanding business in the city.

Pan Gongsheng, deputy governor of the People’s Bank of China, the central bank, said at the two-day Lujiazui Forum that continued efforts should be made so that Shanghai will grow into a hub for world-leading asset management firms. Shanghai already accommodates the world’s top 10 asset management institutions. The forum ended on Friday.

The central bank and State Administration of Foreign Exchange will study the possibilities of expanding the scale of qualified domestic and qualified foreign limited partners. Regulators will also explore management modes for cross-border investment and financing of private equities. With those moves, Shanghai could become a major international market for asset management, Pan said.

According to a State Council plan announced in 2009, Shanghai would grow into a world financial center in line with China’s economic power and the renminbi’s international status by the end of 2020. The Shanghai financial regulator said in early 2019 that the introduction of world leading asset management firms will serve that end.

According to the Shanghai Financial Regulatory Bureau, the world’s top 10 asset management companies have all started operations in Shanghai. Among the 25 wholly owned foreign private equity firms registered with the Asset Management Association of China, 24 have set up offices in Shanghai.

The 81-year-old asset management firm Neuberger Berman set up an investment company in Shanghai in 2016. It was one of the first two companies to apply for mutual fund qualification in China on April 1-the first day foreign ownership limits for mutual funds were eliminated in the country.

During a plenary discussion at the Lujiazui Forum on Friday, Andrew Komaroff, chief operating officer of Neuberger Berman, said that more than 25 percent of the company’s annual income over the past five years came from China.

He said the company’s clients worldwide have shown greater interest in fixed asset and equity investment in China. In this regard, the stock exchange and derivative market in Shanghai should be better integrated into the world capital market so that investors worldwide can have access to the increasingly opened Chinese market, he suggested.

Howard Marks, co-chairman of Oaktree Capital Management, suggested deeper cooperation between Chinese and overseas institutions to come up with more qualified domestic limited partner projects and funds, which in the long term will reduce market volatility, optimize asset allocation and facilitate capital flow.

Investment adviser Vanguard’s president, Mortimer Buckley, said he expects more competition and more participants as the Chinese financial market further opens up. While Shanghai aspires to become one of the hubs of leading global asset management firms, a regulation environment centered on client demand should be set up in the first place, he said. Above all, a pool of top talent is essential for Shanghai to reach its goals, Buckley added.

The Shanghai government has worked to facilitate business operations for foreign companies, officials said. In March, it released a bilingual guide for overseas asset management institutions planning to invest in Shanghai. It helped lower their operational costs by removing the requirement in late 2018 for foreign asset management firms to set up a new entity for each new business.

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