(Bloomberg) — BNP Paribas SA is battling BlackRock Inc. for a slice of China’s 29 trillion yuan ($4 trillion) market. and received approval to form a wealth management joint venture in China, adding competition to global rivals such as Amundi SA.
China’s banking regulator has ordered the French lender’s asset management arm Agricultural Bank of China Ltd. has given permission to establish an enterprise with the wealth department, according to a person familiar with the matter. BNP Paribas Asset Management will own a 51% stake, said the person, who asked not to be identified because the approval was not disclosed.
BNP Paribas Asset “can confirm that it has applied for a license” to set up a venture with the Chinese lender, the company said in an emailed statement, declining to comment further.
Global banks are racing to tap the potential in China’s wealth management market by partnering with its biggest lenders to take advantage of their sprawling distribution networks. Amundi’s joint venture with Bank of China Ltd. controls about $11.6 billion in assets as of June 30, after becoming the first international firm to open such a business in 2020.
“This move by BNP Paribas shows that global interest in China’s wealth space remains strong, although history shows that ease of access to distribution does not guarantee success,” said Peter Alexander, managing director of Shanghai-based consultancy Z-Ben Advisors Ltd. “Global managers see partnering with a bank as the ‘easiest’ choice because banks have the most access to free deposits.”
The Agricultural Bank of China and the China Banking and Insurance Regulatory Commission did not immediately respond to requests for comment.
China began an overhaul of its asset management industry in 2018, banning guaranteed returns and other abuses to curb risks. Banks were required to set up new divisions specializing in wealth management products before global firms began partnering.
The market proved difficult for early entrants despite its potential. Chinese retail investors, accustomed to the guaranteed returns of wealth products, have criticized Amundi for falling short of performance benchmarks, while local press have pointed out that some of BlackRock’s offerings are losing money.
Read about Amundi and BlackRock’s battle for wealth in China
BlackRock’s venture with China Construction Bank Corp has raised more than 7 billion yuan in five products. Goldman Sachs Group Inc. and Schroders Plc won licenses for its partnerships.
BNP Paribas, which posted the highest profit on record in the second quarter, also has a mutual fund joint venture with Haitong Securities Co in China. The asset management unit managed about 500 billion euros ($490 billion) as of June 30.
(Updates with counsel comment in fifth paragraph, eighth background)
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