Deutsche Bank talks on China JV end over disagreement on control, sources say
28/01/2025 13:45
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Deutsche Bank's fund arm DWS had targeted JV in China
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U.S. firm Ares Management was set to be minority partner
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Talks ended as Beijing wanted DB to have majority control
By Selena Li and Iain Withers
HONG KONG/LONDON, Jan 28 (Reuters) - Talks between
Deutsche Bank DBKGn.DE , its asset management arm DWS and
Chinese lender Postal Savings Bank of China (PSBC) over a joint
venture in China have collapsed after the German firm resisted
Beijing's request to boost its stake, sources said.
Deutsche Bank's majority-owned fund arm DWS DWSG.DE has
long been targeting expansion in China's asset management
business and has been speaking to PSBC 601658.SS for about
five years, said two sources with direct knowledge of the
matter.
Calling off the JV talks deals a blow to the German firm's
China ambitions, after Beijing introduced a new framework under
which BlackRock BLK.N and Goldman Sachs GS.N partnered with
large Chinese banks to meet Chinese investors' growing needs.
The development comes amid several rival Western money
managers having hit snags trying to launch or grow in China,
while others have been put off by simmering geopolitical
tensions and a weakened economic outlook.
DWS's latest plan was for Deutsche Bank to own a 47.5% stake
in the venture, with PSBC owing another 47.5%, and U.S.
investment firm Ares Management ARES.N the remaining 5%, the
sources said.
Chinese authorities wanted Deutsche Bank to boost its
holdings in the new venture to take a majority stake on their
own, and the talks foundered on this issue, the sources said,
declining to be named as the discussions were private.
It was not immediately clear why Deutsche Bank did not want
a majority stake.
Beijing in 2019 first said it would allow global firms to
form foreign majority-owned asset management JVs with the wealth
arms of Chinese banks. Current rules don't specify whether at
least one foreign investor must be a majority shareholder.
DWS, Deutsche Bank and Ares declined to comment.
A faxed request and phone calls for comment from the Chinese
banking sector regulator, the National Financial Regulatory
Administration (NFRA), went unanswered due to the Lunar New Year
holidays in China. PSBC also did not respond.
DWS CEO Stefan Hoops, in the role since 2022, has said
expanding in the wider Asia-Pacific region is a strategic
priority. The company still has a footprint in China through its
30% stake in Harvest Fund.
Western financial institutions had been scrambling to get
into China but doubts about its economy, limited dealmaking
opportunities and concerns about regulatory interference have
soured the outlook.
Last year, Fidelity International, Morgan Stanley MS.N ,
and Legal & General LGEN.L , were among those either cutting
China-focused jobs or shelving expansion plans.
(Reporting by Selena Li in Hong Kong and Iain Withers in
London; Additional reporting by Tom Sims in Frankfurt; Editing
by Tommy Reggiori Wilkes and David Evans)
((Iain.Withers@thomsonreuters.com;))