In order to advance its expansion in the second-largest economy in the world, HSBC has decided to buy out its joint venture partner in China’s fund management, according to two people with knowledge of the situation.
As of now, HSBC holds a 49% investment in HSBC Jintrust Fund Management. According to the sources, the bank and Shanxi Trust have a deal in which Shanxi Trust will sell HSBC its 51% stake in the joint venture.
However, the move is pending regulatory assessment and clearance, according to the people, who declined to be named because they were not authorized to speak to the media.
If authorized, China’s $3.8 trillion fund management sector will see an increase in competition from Europe’s largest bank by assets, which generates the majority of its revenue and profit in Asia.
An HSBC representative in Hong Kong declined to respond. Requests for a response from HSBC Jintrust and Shanxi Trust, both of which have their headquarters in Shanghai, were not immediately answered.
The amount that HSBC would pay Shanxi Trust in order to fully own HSBC Jintrust, which as of the end of March, according to the joint venture’s website, had $7.7 billion in funds under administration, was not immediately known.
The latest effort by the lender to increase its position in China is the increase in HSBC’s participation in the fund venture.
The bank, which has its London headquarters, increased its ownership of its China securities joint venture to 90% last year and transformed its China insurance joint venture into a wholly-owned subsidiary in 2021.
As part of an Asia pivot, HSBC has invested billions of dollars in China over the past few years, increasing its market share across the country’s $57 trillion financial sector in the banking, insurance, and securities industries.
About 44% of HSBC’s profit in 2022 came from China, including Hong Kong and the mainland.
Investing in China
A high-ranking official informed HSBC Chief Executive Noel Quinn in March while he was in Beijing that China “welcomed an expansion of HSBC’s investment in the country.”
The bank signed the agreement for the China fund division as it fought off a lengthy effort by shareholder Ping An to separate its Asia unit. At the annual investor meeting on Friday, HSBC was able to resist a break-up proposal.
HSBC is the latest in a long line of international financial institutions to increase its holdings in Chinese fund partnerships by taking advantage of the removal of a foreign ownership ceiling in 2019. These institutions include Manulife, JPMorgan, and Morgan Stanley.
According to the sources, HSBC Global Asset Management, the bank’s fund management subsidiary, is preparing an aggressive drive to secure regulatory clearance for the ownership shift to go into effect.
Before approaching the regulators, it must, according to the sources, cut or sell a majority position indirectly held through its subsidiary Hang Seng Bank in the 70%-controlled fund unit Hang Seng Qianhai Fund Management.
The “One Majority, One Minority” ownership principle, which prohibits both domestic and foreign companies from owning more than two fund units in China, applies to both.
