Selena Li

HONG KONG, (Reuters) – UBS Group AG (SIX) has been in discussions with China Life Insurance Group in order to establish an asset management joint venture. This is part of UBS Group AG’s strategy to increase its presence in China’s second largest economy, according to two sources.

UBS will have a majority share in this business unit. If it is completed, it will become China’s first joint venture foreign majority-owned asset manager with an insurance company since the UBS allowed foreign ownerships in partnerships like these in 2019.

China Life and UBS signed a memorandum to understand to establish the joint venture. However, approval by the China Banking and Insurance Regulatory Commission will need to be granted before the official launch can take place.

Due to the confidential nature of the discussions, both sources refused to identify themselves.

UBS refused to comment while a spokesperson from China Life Insurance Co Ltd (the listed arm of China Life Insurance Group) did not reply to Reuters’ request for comment.

China is stepping up efforts in opening up its financial system, which will be worth trillions of US dollars, to attract more investment from abroad and to shore up the economy amid tensions with the United States.

A host of foreign financial institutions have entered into talks to establish or acquire majority-owned businesses in asset management in the country. Attracted by the promise of increased wealth, despite the current economic problems,

BNP Paribas’ asset management arm (OTC) is currently in discussions to create a wealth management venture together with a unit of Agricultural Bank of China, Reuters reported September. This was in line with the French company’s desire for a larger share of the Chinese market.

The talks by UBS to create a China-based asset management business follow its failure to secure a similar deal this year with a wealth division of a Chinese state bank.

The first source said that UBS wanted to be the absolute controlling entity in China’s unit. However, its rivals are keen to grab the top local partners.

CHINA PRINTEREST

Data from CBIRC shows that 31 China-based insurance asset management businesses had 8.7 trillion yuan (or $2.94 trillion) worth of assets in September.

UBS will expand its presence in China through a joint venture with China Life. China is already a major market for brokerage, investment banking, wealth management, and other services.

UBS SDIC Fund Management is an offshore fund management joint venture that the bank owns 49%. It was acquired in 2005 and had 149.8 billion in retail funds assets as of November 18.

UBS established in 2016 a privately owned asset management unit. This service caters for wealthy institutional investors and individuals with assets of more than 2 million yuan.

Sources said that the scope of operation for the joint venture with China Life is still not finalized and they are currently discussing it with regulators.

China Life Asset Management Company is the arm of China Life Group, which it controls. The China Life Group, owned by China, has 4.5 trillion Yuan worth total assets.

($1=6.3664 renminbi)