Don't expect to quickly win a big slice of China's newly opened mutual fund business.

China plans to allow foreign banks to serve as costodians in its mutual fund industry, yet Reuters reports that foreign entities "face an uphill battle" in tapping this market.

Currently, eighteen banks act as custodians for China's $380 billion mutual fund industry. Regulators have recently drafted new rules to open the industry to foreign players, "in order to promote competition," in the words of the China Securities Regulatory Commission.

But Reuters notes that "in an industry where banks that gain custodian mandates are the ones with the biggest distribution networks," it will be difficult for foreign banks to compete with huge state enterprises.

In the words of the Reuters story, "foreign banks are unlikely to pose much of an immediate threat to China's biggest state-owned lenders, who can leverage their unparalleled distribution power to win and retain clients." 

Edited by: Chris Cumming


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