“After months of delay, China has taken a giant step toward opening its fund-management industry to foreigners. Now it is the fund industry, not the government bureaucracy, that is dragging its feet,” writes Karen Richardson in today’s Wall Street Journal.

“The China Securities Regulatory Commission, or CSRC, last week accepted the first applications for joint-venture fund-management companies, signaling the government’s commitment to keep promises it made to secure World Trade Organization membership earlier this year. The regulatory body will rule on the applications within 60 days.”

“But only a handful of applications have been submitted.”

“The lack of progress some six months after China was expected to swing open the doors to its fund-management industry, allowing access to nearly $1 trillion of domestic savings, illustrates just how difficult doing business in China is even in the WTO era. Foreign fund managers initially were elated at the market-opening terms China agreed to as part of its December entry into the WTO. They began chafing in the months preceding its entry, as China appeared to drag its feet on issuing guidelines on how it would deregulate the industry. And later, some foreigners were unhappily surprised by the limited number of fund-management joint-venture structures permitted under new CSRC rules.”

“Yet, although regulators are moving ahead, the industry is having trouble clearing a new set of hurdles. At least a dozen foreign companies have signed preliminary agreements for joint ventures with local partners — foreigners can’t enter the market on their own yet — and are expected to submit their applications soon. But international fund managers are finding that forging joint-venture agreements with local partners is slow going; foreigners fear hooking up with a local partner that has hidden financial problems, while Chinese companies are reluctant to give up too much control for too little money.”

” ‘Many [foreign] fund managers are still talking to potential partners, and existing partners are still talking on price,’ says Taylor Hui, a lawyer at Deacons in Hong Kong.”

“Some companies are moving forward. Two parties that confirmed that their applications were accepted last week are Allianz Dresdner Asset Management of Germany, whose Chinese partner is Guotai Junan Securities, and French SG Asset Management, paired with Fortune Trust & Investment.”

“But others are still working out deals. Notably absent from this first group of applicants is Jardine Fleming Asset Management and its partner Hua’an Fund Management Co. Hong Kong-based Jardine Fleming is a unit of J.P. Morgan Chase & Co.’s fund-management arm. Jardine Fleming and Hua’an remain the closest-watched pair in the industry, having successfully launched China’s first open-ended mutual fund last September. Some expected they would be among the first to gain approval for a local fund-management operation.”