Recently, there have been rumors in the market that Vanguard, one of the world’s largest asset management giants and public fund companies, is planning to withdraw from China and close its offices in the country.
On November 10th, Vanguard replied, ‘The news is true.’
Recently, Vanguard Investment Advisory (Shanghai) Co., Ltd. has undergone several changes in its business registration. The company’s name has been changed to Ant Investment Advisory (Shanghai) Co., Ltd. Additionally, Vanguard Investment Management (Shanghai) Co., Ltd. has withdrawn from the list of shareholders, and Ant Fund Sales Co., Ltd. (Hangzhou) now holds 100% of the shares, previously holding 51%. Furthermore, Christopher Davis MCISAAC and others have resigned from the board of directors.
Vanguard was founded in the United States in 1975. In 1976, Vanguard pioneered index investing by launching the first index fund for individual investors in the US. After decades of development, Vanguard has become one of the world’s largest mutual fund management companies, with operations spanning Australia, Europe, Asia, and America.
Now, Vanguard leads the global asset management industry with a scale of $7.8 trillion, providing fund products and professional services in asset management to over 50 million investors.
Vanguard established its wholly foreign-owned enterprise, Vanguard Investment Management (Shanghai) Co., Ltd., in the Shanghai Free Trade Zone on May 25th, 2017.
On June 5th, 2019, Ant Financial and Vanguard jointly established Vanguard Investment Advisory (Shanghai) Co., Ltd. (referred to as “Vanguard Investment Advisory”) in Shanghai, with a shareholding of 51% and 49% respectively.
At the same time, as the China Securities Regulatory Commission officially lifts restrictions on foreign ownership in securities firms and mutual fund companies, the door to China’s financial market is officially opening to foreign institutions. Vanguard continues to advance its application for a Chinese public offering license.
In the first half of 2020, several executives from Vanguard’s Asia and China divisions resigned one after another. In August 2020, Vanguard announced its withdrawal from the Hong Kong and Japan markets and relocated its Asian headquarters to Shanghai. In September, Vanguard appointed a new head of public fund business, but plans were later put on hold. Zhang Yu, CEO of Vanguard Investment Advisory (Asia), officially joined HSBC Group as the head of HSBC Private Wealth Planning Fund and Products.
As early as the end of the first quarter and the beginning of the second quarter this year, there were rumors in the market about Vanguard withdrawing from China. The company previously responded to media inquiries by stating that Vanguard Investment Management (Shanghai) Co., Ltd. and related operations of Vanguard Consulting are all operating as usual. ‘Due to internal policy considerations, we will not respond to any rumors or speculations.’
Although it has officially confirmed its withdrawal, Vanguard still maintains an optimistic sentiment towards the Chinese market. In the market and economic outlook for November, Vanguard stated that the People’s Bank of China lowered the reserve requirement ratio for financial institutions by 0.25 percentage points in September, which helped boost market sentiment and meet liquidity demands amid accelerated issuance of local government bonds.
In the third quarter, China’s gross domestic product (GDP) growth exceeded expectations, but this is in line with the previous forecasts by Vanguard. They believe that the main reason for the growth lies in the increased strength of policy support.
Vanguard still sets China’s annual economic growth forecast in the range of 5.25% to 5.75%, higher than market expectations, and states: ‘Our forecast largely depends on the recovery of private sector and household confidence.’