Hong Kong, Feb 21 (Reuters) - Abrdn is in advanced discussions with Citic Bank to establish an asset management joint venture in China, according to two individuals familiar with the matter. This move by the British firm aims to enhance its presence in the world's second-largest economy.
The talks come amid a recent improvement in British-Sino relations and stand in contrast to decisions made by various Western financial institutions in recent years. Some of these institutions either reduced jobs in China or postponed expansion plans due to concerns about the Chinese economy's health and tensions between Beijing and Washington.
Abrdn, the second-largest independent asset manager in the UK, is anticipated to hold a majority stake in the joint venture, with Citic Bank's unit Citic Wealth owning the remaining stake, as per the knowledgeable sources who opted not to disclose their identities because of the confidential nature of the discussions.
Citic Wealth is China's third-largest bank-owned wealth management unit, boasting 2 trillion yuan ($275 billion) in assets as of the end of last year.
It is anticipated that regulatory approval for the deal will be sought later this year, one of the sources mentioned.
Abrdn declined to comment, and Citic Bank, the primary banking entity of China's state-owned conglomerate Citic Group, did not respond to a Reuters request for comments.
Despite Abrdn being currently amid a process of , China remains a significant growth focus. The British firm also has a 50-50 insurance joint venture established in China in 2003 and a private fund unit initiated in 2015, being the first of its kind.
Its businesses across the Asia-Pacific region, including operations in Singapore, Japan, and Australia, account for 16.5 billion pounds ($21 billion) in assets, representing 7.8% of its global total.
A successful agreement would signify the second asset management venture formed by a Chinese bank-owned wealth unit and a British firm. Schroders has a majority-owned venture with Bank of Communications launched in 2021.
The sources revealed that Abrdn and Citic Bank have been in discussions for the past few years about establishing a venture in mainland China or Abrdn acquiring a stake in Citic Wealth.
These discussions gained momentum following recent high-level economic engagements between China and the UK, which were revived last month after being on hold for nearly six years, they further noted.
China's Foreign Minister Wang Yi also paid an official visit to Britain this month for the first time in a decade, with Beijing pledging to collaborate with the UK and further enhance trade and investment partnerships.
China's wealth industry, which manages approximately $20 trillion in assets, has encountered fierce competition and a 20% decline in the benchmark CSI300 stock index between 2022 and 2024.
This downturn has put several foreign players at a disadvantage. Last year, Fidelity International laid off 500 roles at one of its China operations, while Morgan Stanley also downsized a Chinese asset management unit, as per insider sources.
Nevertheless, the Chinese stock market has seen a rebound this year, with the index rising by 23% since Beijing's announcement of stimulus policies last September. These measures have been supportive, as has been the effort by President Xi Jinping to boost corporate sentiment, particularly in the tech sector.
($1 = 7.2724 Chinese yuan)