Talks between Deutsche Bank, its asset management arm DWS, and Chinese lender Postal Savings Bank of China (PSBC) regarding a joint venture in China have collapsed. The sources revealed that the German firm rejected Beijing's request to increase its stake, marking a setback for Deutsche Bank's China aspirations.
For about five years, DWS has been aiming to expand in China's asset management sector and has been in discussions with PSBC. The termination of the joint venture discussions deals a blow to Deutsche Bank's plans in China, especially after Beijing allowed partnerships between BlackRock, Goldman Sachs, and Chinese banks to cater to the needs of Chinese investors.
Several Western financial firms are either pursuing or hesitating to enter the Chinese market amidst geopolitical tensions and an uncertain economic outlook. DWS's recent proposal involved Deutsche Bank owning 47.5%, PSBC holding the same, and U.S. firm Ares Management having the remaining 5% in the venture.
Chinese authorities insisted that Deutsche Bank increase its stake to take a majority position, leading to the breakdown of the talks. The reasons behind Deutsche Bank's reluctance to secure a majority stake are unclear. Beijing initially permitted foreign firms to establish asset management JVs with Chinese banks, but the current regulations do not mandate at least one foreign investor to hold a majority share.
Representatives from DWS, Deutsche Bank, Ares, and PSBC declined to comment. Efforts to reach the National Financial Regulatory Administration (NFRA) during the Lunar New Year holidays in China were unsuccessful.
DWS CEO Stefan Hoops, who assumed the role in 2022, emphasized the strategic importance of expanding in the broader Asia-Pacific region. While Western financial institutions have strived to enter China, concerns about its economy, limited deal opportunities, and regulatory uncertainties have clouded their outlook. Last year, firms like Fidelity International, Morgan Stanley, and Legal & General scaled back their China-focused operations or postponed expansion plans.