Deutsche Bank's China JV Talks Collapse Over Stake Dispute
Hong Kong/London (Reuters) - Negotiations between Deutsche Bank, its asset management arm DWS, and China's Postal Savings Bank of China (PSBC) for a joint venture in China have ended in failure. Sources familiar with the matter attributed the breakdown to Deutsche Bank's refusal to increase its stake as requested by Beijing.
DWS, a majority-owned subsidiary of Deutsche Bank, has been seeking to expand its asset management presence in China for several years. Its discussions with PSBC began approximately five years ago.
The collapse of the JV talks represents a setback for Deutsche Bank's China aspirations, particularly in light of Beijing's introduction of a new framework allowing BlackRock and Goldman Sachs to establish majority-owned JVs with Chinese banks.
This development coincides with challenges faced by other Western money managers seeking to establish or grow their operations in China. Geopolitical tensions and the weakening economic outlook have also deterred some.
Under DWS's initial plan, Deutsche Bank would have held a 47.5% stake in the JV, PSBC would have owned another 47.5%, and U.S.-based Ares Management would have acquired the remaining 5%.
However, Chinese authorities sought to increase Deutsche Bank's stake to a majority position, a demand that the German firm resisted. Sources declined to reveal the reasons behind Deutsche Bank's reluctance.
In 2019, Beijing announced plans to allow global firms to form majority-owned asset management JVs with Chinese banks. Current regulations do not explicitly require a foreign investor to hold a majority stake.
Neither DWS, Deutsche Bank, nor Ares have provided any official comment. The Chinese banking sector regulator, the National Financial Regulatory Administration (NFRA), did not respond to faxed inquiries or phone calls due to the Lunar New Year holidays in China.
Despite the setback, DWS CEO Stefan Hoops, who took the helm in 2022, has emphasized that expansion in the Asia-Pacific region remains a key strategic objective. The company maintains a 30% stake in Harvest Fund, giving it a foothold in the Chinese market.
Western financial institutions have historically shown keen interest in entering China, but factors such as economic uncertainty, limited deal opportunities, and regulatory concerns have dampened enthusiasm. In 2022, Fidelity International, Morgan Stanley, and Legal & General downsized China-focused operations or shelved expansion plans.