ASSET MANAGEMENT IN 2017 Transitioning Under a New System

Overview & Methodology SUBSCRIPTION DETAILS In its 12th iteration, this report focuses on one of the biggest and most dynamic asset management markets in the region—China. It examines regulatory developments and their effect on the asset management ANNUAL industry, key retail product and distribution developments, institutional 143 PAGES demand, and cross-border product and distribution opportunities. $19,000 78 EXHIBITS This report includes two 24-page strategic overviews to supplement the full report. The 1Q 2017 Strategic Overview is available in April 2017, and the 2Q 2017 Strategic Overview is available in June 2017. PURCHASE INCLUDES Data comes from proprietary surveys of asset managers in China, and more than 30 interviews with asset managers, distributors, regulators, yy Digital copy and hardcopy in color and other industry executives. yy Online access to 11 related reports yy Unlimited online firm-wide access Benefits: yy Exhibits in Excel yy Key findings yy Understand the key trends in China’s asset management industry and potential strategies for foreign asset managers yy Analyst support y yy Analyze the onshore exposure of existing wholly foreign-owned y Interactive Report Dashboards NEW enterprises yy Executive Summary Video NEW yy Assess the competitive landscape of China’s asset management RESEARCH INCLUDED WITH SUBSCRIPTION industry focusing on foreign managers’ entry routes yy Review China’s retirement market and assess opportunities for yy 9 years of The Cerulli Report - Asset Management managers in this sector in China yy 2 years of The Cerulli Report - Asset Management in Questions Answered: China & India

yy What are the industry trends asset managers should take note of? yy How should managers align their business strategies with the For more information, contact us: evolving regulatory system? yy What are the routes that foreign asset managers can take to access ``[email protected] the China market, and how can managers stand out from the intense competition? yy What is the landscape of China’s retirement market and how can managers access it? yy How has fintech developed in China’s asset management space?

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CERULLI ASSOCIATES | [email protected] | www.cerulli.com Chapter 2 Regulatory Restructuring

Exhibit 2.05 China’s Financial Regulatory Structure Source: Cerulli Associates

State Council Financial Stability and Development Committee

People's Bank of China (PBoC) State Administration of Foreign Exchange (SAFE)

Monetary policy Macro-prudential management

China Banking Regulatory China Securities Regulatory China Insurance Regulatory Commission (CBRC) Commission (CSRC) Commission (CIRC)

Banks, trusts, four financial Securities companies, futures Insurance companies, asset management compa- companies, fund manage- insurance asset management nies, non-bank deposit ment companies, exchanges, companies, Insurance Asset financial institutions, P2P, etc. Asset Management Management Association of Association of China China (IAMAC), etc. (AMAC), etc.

30 The Cerulli Report | Asset Management in China 2017 Table of Contents

Table of Contents: Expanded

Methodology ...... 11

Executive Summary ...... 13

Key Questions Answered ...... 14 1. What key industry trends in China in 2017 should asset managers take note of? ...... 14 2. How should managers align their business strategies with the evolving regulatory system? ...... 15 3. What is the competitive landscape like for foreign asset managers? ...... 16 4. What is the state of China’s retirement market and how can managers access it? ...... 17 Exchange Rates ...... 18 Exchange Rates ...... 18 Chapter 1: Overview of Key Asset Management Trends in China ...... 19 AAExhibit 1.01 Chinese Asset Management Industry Snapshot, 2014–2Q 2017 ...... 20 Exhibit 1.02 Approved List of Public Funds of Funds, September 2017 ...... 21 Exhibit 1.03 Products of Fund Management Companies and Private Fund Companies, June 2017 ...... 22 Exhibit 1.04 Robo-Advisors in China ...... 24 Exhibit 1.05 Snapshot of Portfolios and Subscribers to NetEase Dr.8, September 2017 ...... 25 Chapter 2: Regulatory Restructuring ...... 26 Exhibit 2.01 Banks’ Wealth Management Product , 2014–2016 ...... 26 Exhibit 2.02 Breakdown of China’s Asset Management Industry, 2016 ...... 27 Exhibit 2.03 Two Examples of Closed-Loop Investment of Banks’ Assets ...... 28 Exhibit 2.04 Key Decisions Made at National Financial Work Conferences, 1997–2017 ...... 29 Exhibit 2.05 China’s Financial Regulatory Structure ...... 30 Exhibit 2.06 Timeline of Key Regulatory Efforts in China’s Asset Management Industry, July 2016–July 2017 ...... 31 Exhibit 2.07 Example of How a Fund Management Company’s Business Can Be Split into Different Subsidiaries ...... 34 Chapter 3: Competitive Landscape ...... 37 Exhibit 3.01 Chinese Mutual Fund Assets Under Management by Manager Type, 2011–June 2017 ...... 38 Exhibit 3.02 Largest 20 Mutual Fund Managers in China, June 2017 ...... 39

The Cerulli Report | Asset Management in China 2017 7 Table of Contents

Exhibit 3.03 Largest 20 Wholly Local Mutual Fund Managers in China, June 2017 ...... 41 Exhibit 3.04 Chinese Qualfied Domestic Funds, 2008–2Q 2017 ...... 42 Exhibit 3.05 Companies With Funds Approved or Pending Approval on the Mutual Recognition of Funds Scheme, August 2017 . . 44 Exhibit 3.06 Wholly Foreign-Owned Enterprise License Holders and Their Other Businesses, September 2017 ...... 45 Exhibit 3.07 Chinese Private Fund Industry Snapshot, 2014–June 2017 ...... 47 Exhibit 3.08 Number of Registered Private Fund Managers by Type and Size, August 2017 ...... 48 Exhibit 3.09 Process to Launch Private Funds Through Wholly Foreign-Owned Enterprises in China ...... 49 Chapter 4: Pensions ...... 50 Exhibit 4.01 Chinese Demographics, 2001–2030E ...... 51 Exhibit 4.02 Chinese Retirement Market Size, 2012–2016 ...... 52 Exhibit 4.03 List of Qualified Onshore Fund Managers for Chinese Pension Business, August 2017 ...... 53 Exhibit 4.04 Snapshot of the First Pillar of the Chinese Pension System, 2017 ...... 55 Exhibit 4.05 Selected Chinese Retirement Scheme Returns, 2012–2016 ...... 56 Exhibit 4.06 Snapshot of the Second Pillar of the Chinese Pension System, 2017 ...... 57 Exhibit 4.07 Chinese Pension Insurer Assets Under Management and Assets Under Entrustment, 2012–2Q 2017 ...... 59 Exhibit 4.08 Chinese Pension Insurer Assets Under Management and Assets Under Entrustment by Company, 2016–2Q 2017 . . .60 Exhibit 4.09 Snapshot of the Third Pillar of Chinese Pension System, 2017 ...... 61 Chapter 5: Retail Business ...... 64 AAExhibit 5.01 Chinese Mutual Fund and Exchange-Traded Fund Assets Under Management, 2012–2Q 2017 ...... 65 AAExhibit 5.02 Breakdown of China’s Assets Under Management by Sector, 2015–2Q 2017 ...... 66 AAExhibit 5.03 Chinese Open-End Mutual Fund Assets Under Management by Investment Objective, 2012–2Q 2017 ...... 68 AAExhibit 5.04 Chinese Open-End Mutual Fund Net New Flows by Investment Objective, 2012–2Q 2017 YTD ...... 69 Exhibit 5.05 Chinese Mutual Fund Assets Under Management by Investor Type, 2014–2016 ...... 70 AAExhibit 5.06 Chinese Mutual Fund Assets Under Management by Distribution Channel, 2014–2016 ...... 71 Exhibit 5.07 Chinese Fund Management Industry Entrants, Exits, and Expansions, August 2016–July 2017 ...... 73 AAExhibit 5.08 Cerulli Asset Manager Survey Respondents’ Biggest Concerns for China’s Retail Business, 2017 ...... 75 AAExhibit 5.09 Cerulli Asset Manager Survey Respondents’ Views on Product Features That Appeal to Retail Investors in China, 2017 ...... 76 Exhibit 5.10 Fundraising Results of New Funds Launched in China, 2016–2Q 2017 YTD ...... 77 Exhibit 5.11 Chinese Mutual Fund Management Company Open-End Product Application Status, July 2017 ...... 78 Exhibit 5.12 Chinese Mutual Fund Fees and Distribution Charges, 2016 ...... 79 Exhibit 5.13 Largest 20 Mutual Fund Managers in China, 2016–2Q 2017 ...... 80 Exhibit 5.14 Fully Operational Joint Venture Assets Under Management, 2016–2Q 2017 ...... 82

8 The Cerulli Report | Asset Management in China 2017 Table of Contents

Chapter 6: Institutional Business ...... 85 Exhibit 6.01 Largest 10 Chinese Institutional Investors by Assets Under Management, 2017 ...... 87 AAExhibit 6.02 Chinese Institutional Investable Assets, 2012–2016 ...... 88 AAExhibit 6.03 Chinese Institutional Addressable Assets, 2016–2021E ...... 89 AAExhibit 6.04 Chinese Discretionary Assets Breakdown, 2012–June 2017 ...... 90 Exhibit 6.05 Chinese Discretionary Assets by Fund Management Company and FMC Subsidiary, 2Q 2017 ...... 91 Exhibit 6.06 Snapshot of the Chinese Pension System, 2017 ...... 93 Exhibit 6.07 Chinese National Social Security Fund Assets by Management Type and Annual Return, 2012–2016 ...... 94 Exhibit 6.08 China’s Enterprise Annuity: Licensees, 2015–1Q 2017 ...... 96 Exhibit 6.09 Chinese Enterprise Annuities Average Management Fees and Assets Under Management by Product Type, 2015–2Q 2017 ...... 98 AAExhibit 6.10 The People’s Bank of China’s Foreign Exchange Reserves, 2012–June 2017 ...... 99 Exhibit 6.11 CIC International’s Global Investment Portfolio, 2012–2016 ...... 100 Exhibit 6.12 CIC International’s Global Investment Portfolio by Investment Objective, 2012–2016 ...... 101 Exhibit 6.13 Chinese Life Insurance Total Premiums, 2012–June 2017 YTD ...... 102 Exhibit 6.14 Largest 10 Chinese Life Insurance Companies by Premiums, 2015–June 2017 YTD ...... 103 AAExhibit 6.15 Chinese Life Insurance Company Investable Assets, 2012E–June 2017E ...... 104 Exhibit 6.16 List of Insurance Asset Management Companies, July 2017 ...... 106 Exhibit 6.17 List of Insurance Companies Obtaining Approval for Overseas Investment, 2013–July 2017 ...... 108 AAExhibit 6.18 Chinese Total Foreign Investments, 2012–March 2017 ...... 109 Chapter 7: Competing Products ...... 110 Exhibit 7.01 Snapshot of Selected Financial Products in China, June 2017 ...... 111 AAExhibit 7.02 Performance of Banks’ Wealth Management Products, August 2016–July 2017 ...... 112 Exhibit 7.03 Registered Private Funds in China, August 2016–July 2017 ...... 113 AAExhibit 7.04 Chinese Trust Assets Under Management and Asset Breakdown, 3Q 2015–2Q 2017 ...... 114 Exhibit 7.05 Securities Firms’ Assets Under Management by Plan Type, 3Q 2015–2Q 2017 ...... 116 AAExhibit 7.06 Growth of Online Peer-to-Peer Products, January 2016–July 2017 ...... 117 AAExhibit 7.07 Chinese Investment-Linked Product Assets Under Management by Asset Class, 2012–2016 ...... 118 AAExhibit 7.08 Asset Management Products Launched by Futures Companies, July 2016–June 2017 ...... 119 Chapter 8: Cross-Border Schemes ...... 120 Exhibit 8.01 Channels for Accessing Onshore Investments in China ...... 121 Exhibit 8.02 Total Qualified Foreign Institutional Investor Quota Awarded by Year, 2003–July 2017 YTD ...... 122 Exhibit 8.03 Qualified Foreign Institutional Investor Quota by Institution Type and Region, June 2016–June 2017 ...... 123

The Cerulli Report | Asset Management in China 2017 9 Table of Contents

Exhibit 8.04 Renminbi Qualified Foreign Institutional Investor Investment Quota by Geography and Number of License Holders, July 2017 ...... 124 Exhibit 8.05 Comparison of Pilot Outbound Schemes Across Selected Pilot Cities ...... 126 Exhibit 8.06 Part 1. - Stock Connect Trade Flows, August 2016–July 2017 ...... 127 Exhibit 8.06 Part 2. -Hong Kong Stock Connect Trade Flows, December 2016–July 2017 ...... 129 Exhibit 8.07 Hong Kong-China Mutual Recognition of Funds: List of Approved Northbound and Southbound Funds, July 2016–August 2017 ...... 131 Exhibit 8.08 Mutual Recognition of Funds Net Capital Flows, January 2016–July 2017 ...... 133 Appendix ...... 134 Exhibit A.01 Hong Kong-China Mutual Recognition of Funds: Northbound Fund Application Status, August 2017 ...... 134 Exhibit A.02 Hong Kong-China Mutual Recognition of Funds: Approved List of Southbound Funds, August 2017 ...... 135 Exhibit A.03 List of Fund Managers and Bank Custodians With NSSF Mandates, August 2017 ...... 137 Glossary ...... 139

Index of Companies ...... 141

10 The Cerulli Report | Asset Management in China 2017 Index of Companies

ABCI Asset Management...... 125 Aberdeen Asset Management...... 22, 37, 43 AEGON-Industrial Fund Management...... 40, 64 Alibaba...... 13, 22, 23, 64, 117 Alinda Capital Partners...... 101 Alipay...... 71, 72 Allianz...... 43 ...... 43, 131 AnBang Insurance...... 103 Ant Financial...... 64, 71, 117, 132 Antarctica Capital...... 101 Ashmore-CCSC Fund Management...... 84 Baidu...... 104 Bank of China Investment Management...... 40, 43 Chang’an Group...... 74 BlackRock...... 40, 43 BNY Mellon...... 49 Bosera...... 54, 64, 88 CCB Principal...... 33, 36, 40 China Asset Management...... 35, 40, 54, 65, 88 China Construction Bank (CCB)...... 40 China International Fund Management...... 40 China Investment Corporation (CIC)...... 100, 101, 109 China Life...... 59, 101, 103, 104 China Merchant Bank (CMB)...... 23, 111, 113 China Pacific...... 103, 104 China Post & Capital Fund...... 74 China Post & Capital Fund Management...... 74 China Universal Asset Management...... 35, 65 CIB Fund Management...... 40 Citibank...... 43 CITIC Securities...... 116 Creditease...... 110, 113 Dacheng Fund Management...... 54, 88 Deutsche Asset Management...... 38

The Cerulli Report | Asset Management in China 2017 141 Index of Companies

East Money...... 71 Fidelity...... 13, 22, 43, 44, 47, 48, 67 Fortune SG Fund Management...... 42 Franklin Templeton...... 43 Fullerton Fund Management...... 13, 22, 44, 47 Fullgoal...... 81 Funde Sino Life...... 103 Guohua Life...... 118 Harvest Fund...... 33, 38, 40, 43 Hong Kang Life...... 118 HSBC...... 43 HSBC Global Asset Management...... 43, 62 HSBC Jintrust...... 62 ICBC Asset Management...... 33, 38, 40, 81 Industrial Bank...... 40 InterPark...... 101 Great Wall Fund Management...... 40 J.P. Morgan...... 16, 37, 40, 43, 132, 133 JD Finance...... 13, 64 Juaicai Plus...... 23 Legg Mason...... 43 Lufax...... 110 ...... 13, 22, 44, 47 Mirae Asset...... 44 NetEase...... 23 New China Life...... 103 Noah Holdings...... 113 Penghua Fund Management...... 40 Pictet...... 43 Ping An...... 23, 40, 59, 103, 110 Ping An UOB Fund Management...... 40, 81 Pintec...... 23 Principal Financial Group...... 40 Rongtong Fund Management...... 40 Russell...... 65 ...... 43, 44 Shanxi Trust and Investment Corporation...... 62 Société Générale...... 33, 74

142 The Cerulli Report | Asset Management in China 2017 Index of Companies

Standard Chartered Bank...... 43 Taikang...... 58, 120, 122 Taiping Fund Management...... 84 Taiping Life...... 103 TIAA Private Investments...... 101 Tianhong Asset Management...... 21, 33, 64, 132 TianTian Fund...... 72 Total Invest Group Asset Management...... 125 Truvalue Asset Management...... 79 UBS Asset Management...... 13, 22, 44, 47 Value Partners...... 44, 49 Warburg Pincus...... 33, 42, 74 WeChat...... 22, 71, 132 Xuanji...... 23 Yinhua Fund Management...... 54, 88, 131 Zeal Asset Management...... 132 Zhong Ou Asset Management...... 74

The Cerulli Report | Asset Management in China 2017 143