Manulife Approved to Sell Mutual Funds in China

China’s securities regulator has given Manulife Investment Management approval to take full ownership of its local fund-management arm. This is a first in a country that is slowly opening up its $3.7 trillion mutual fund market.

The Canadian-owned firm will become the first foreign fund manager to convert a local joint venture into a fully-owned entity. It applied for full ownership after a rule change in April 2020 that scrapped a previous 51% cap for foreign shareholders. This move will allow the firm to have full control over its operations in the country.

Manulife is the latest foreign firm to get approval for a fully-owned local mutual-fund manager. BlackRock Inc. and Fidelity International both have permission to do so, but neither firm previously ran a mutual-fund company with a local partner. This is a significant development for Manulife, as it expands its presence in the Asian market.

This approval is part of a wider effort to open up China's financial market, which previously required foreign firms to operate using joint ventures. With this approval, foreign banks, securities houses, and credit-rating firms no longer need local partners.

JPMorgan Chase & Co. and Morgan Stanley have both applied for approval to increase their ownership in their own Chinese fund-management entities. Other foreign firms including Neuberger Berman and VanEck have either set up or are seeking approval to set up their own mutual funds in China.

Manulife Investment Management is the global wealth and asset management arm of Manulife Financial. It offers a wide range of investment products and services to individuals, families, and institutions around the world.

The corporation previously held a 49% stake in a fund manager it owned with the state-owned Tianjin TEDA International Holding.

Manulife Investment Management's Asia head of wealth and asset management, Michael Dommermuth, stated that the two companies have been discussing a deal for the past two years. He also mentioned that the joint venture had around $12 billion in assets under management in China by June.

In August, the Chinese securities watchdog asked Manulife to explain how it would manage cross-border data flows when it gets full approval. China’s internet regulator tightened rules on cross-border data transfer in July. According to the new rules, which kicked in on Sept. 1, companies processing data for key industries including finance must pass a security review by the Cyberspace Administration of China before they can transfer personal data abroad.

Manulife has announced that Xu Jin will become chairwoman of the company's China business. Ms. Jin was most recently vice chair and chief executive officer of China Merchants Fund Management Co., the fund house under China Merchants Bank. She previously worked at the Chinese Securities Regulatory Commission.