JPMorgan’s Asset Unit to Focus on Shanghai for China Expansion

  • Set up China’s first wholly owned foreign money manager
  • Country head sees rising cross-border investment flows

JPMorgan Chase & Co.’s asset-management unit has chosen Shanghai’s free-trade zone as the main venue for its China business, to meet rising demand for cross-border investments.

The U.S. company, which oversees $1.7 trillion globally, set up China’s first wholly owned foreign money manager last month and plans to consolidate its business in the nation into the newly established unit in Shanghai. JPMorgan Asset Management (Shanghai) Ltd. will provide the platform for the group’s future development in China and become the parent for potential legal entities to be set up there, country head Desiree Q. Wang said.

“As China opens up, cross-border investments will certainly grow because the market used to be a system of its own,” Wang said in an interview in Shanghai on Tuesday.

Chinese authorities have been trying to strike a balance between opening up the market to attract more inflows, and further liberalizing the capital account in some areas that could worsen outflows after last year’s surprise yuan devaluation and ensuing stock-market rout. The nation began the free-trade zone in Shanghai in 2013 and has since set up 10 more to carry out trials on loosening movements of capital.

“We chose the Shanghai free-trade zone to set up the company because it has a lot of potential,” Wang said. “We hope to see more policies from the area to support cross-border business and our expansion.”

For a QuickTake explainer on freeing up yuan use, click here.

The People’s Bank of China scrapped a quota system for foreign asset managers to access the onshore interbank bond market, and the China Securities Regulatory Commission eased restrictions for qualified foreign institutional investors who use the yuan and other currencies to invest onshore. The nation failed for a third time to get included in MSCI Inc.’s benchmark stock indexes in June and is looking to be added to major bond gauges, which HSBC Holdings Plc estimated could bring as much as $150 billion to the government debt market alone.

“There will be more outbound flows, not necessarily because local markets aren’t doing well, but simply because domestic investors didn’t have any choices to diversify their assets,” said Wang. “At the same time, we expect to see more inflows, especially to the bond market.”

J.P. Morgan Asset Management set up a joint venture with Shanghai International Trust Co. in 2004, with the Chinese side holding 51 percent of the company, China International Fund Management Co., which managed 123.9 billion yuan ($18.6 billion) of assets at the end of last year.