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JPMorgan to shell out $1 billion for full ownership of CIFM

JPMorgan’s asset management business is to buy the 49% stake in CIFM to tap into the country’s growing affluent finance sector.
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JPMorgan Chase & Co. will have to pay a pricey premium to become the first foreign company to fully own a mutual fund business in China. The New York-based banking group would have to pay 7 billion Yuan ($1 billion) to buy the remaining 49 percent of China International Fund Management (CIFM), according to a statement released on Tuesday on the Shanghai United Asset and Equity Exchange.

A wave of reforms in the country’s growing investment industry has attracted some of the world’s biggest financial businesses.

The JPMorgan Chase & Co. headquarters on Park Avenue in New York, NY

The price represents a premium of more than 50 percent compared with a recent valuation of the company, which JPMorgan said it would fully consolidate.

The Great Wall

On January 1, 2020, China imposed a new Foreign Investment Law (FIL), a landmark legislation aimed to further open its market for foreign investors and to ensure that foreign enterprises participate in market competition on an equal basis.

The relaxation aimed to attract more foreign participation in the financial sector. The decision was made in response to the trade war with the U.S.

In April, JPMorgan announced plans to buy out its partner in a move it said would fortify its capabilities in the Chinese market. BlackRock and Neuberger Berman followed its footsteps by setting up mutual fund businesses in China.

Global asset management firms are keen to capitalize on China’s $45 trillion financial market, with companies like Goldman Sachs Group, UBS Group AG, and JPMorgan adding more staff and expanding across all directions, from brokerages and futures to asset management.

China has also become a hot destination for wealth management firms as Chinese households are sitting on investable assets worth $13 trillion.

JPMorgan Asset Management, which owns 51% of CIFM, in April formed an agreement with its Chinese partner, Shanghai International Trust Co., for 100% ownership of the fund venture.

Last December, JPMorgan won Chinese regulatory approval to establish a majority-owned securities venture. In June, it received the green light for China’s first fully foreign-owned future business.

The relaxation was part of a move to allow more foreign participation in the financial sector, partly in response to the trade war with the US. Last year officials brought forward the timeline for full foreign ownership of securities, futures and fund management companies to 2020.

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