BRITISH insurer and asset manager Legal & General has shelved a plan to obtain a China business licence and more than halved onshore headcount, two sources said, joining a list of global financial firms scaling back in an uncertain market.

Legal & General (L&G) had been planning to apply for a QDLP (Qualified Domestic Limited Partner) licence that allows foreign firms to sell offshore products to Chinese investors as part of its asset management business push, said the sources, who had direct knowledge of the matter.

The company, with £1.2 trillion (S$2.05 trillion) worth of assets under management globally, has shelved that plan now and, as a result, cut its local team size last month to two people from around 10, they added.

The remaining two will focus on the firm’s existing business of managing Chinese institutional investors’ offshore assets, said the sources, who declined to be named as they were not authorised to speak to the media.

L&G did not comment on the business licence shelving or the job cuts when Reuters sought a response but said that China remained “an important and large market opportunity for asset management over the long term”.

“This is why we are choosing to maintain a presence through our representative office and to retain a small team,” it said, adding the firm continued to actively seek ways to grow existing Chinese clients investing in international markets.

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L&G, whose businesses in its home market stretches from pensions to housebuilders, said that for now it would continue to focus on growing its presence and business in Asia, through hubs in Singapore and Hong Kong.

The move by L&G, one of UK’s largest insurers, adds to an expanding list of global financial firms reining in their China business ambitions amid market and economic uncertainties, and geopolitical tensions.

Fund manager Fidelity International, for instance, is planning to lay off 20 people at its main China unit, Reuters reported earlier, which will be a 16 per cent cut that is much deeper than its global average headcount reduction target of 9 per cent.

Morgan Stanley has also laid off about 9 per cent of its staff at its asset management business unit in China, as the country’s tepid stock market dampens the prospects of its US$3.8 trillion funds sector.

China’s stock market woes

L&G, under new CEO Antonio Simoes, is set to outline a new global strategy in June.

The insurer registered a wholly foreign-owned enterprise in China in 2020, and has been building the team in Beijing over the last couple of years, as it planned to explore business opportunities in pension and asset management businesses, said the sources.

But the performance of China’s stock market has been dismal, with mainland shares lagging global stocks for three years, and surging markets in the US, India, and Japan luring money managers away from the world’s second-largest economy.

China’s benchmark CSI 300 Index plunged to a five-year low earlier this year, before it bounced back slightly in recent weeks and is up 2.8 per cent year to date.

It is still more than 40 per cent down from a peak hit in 2021, pressured by a slowing domestic economy, a deepening property sector and local government debt crisis, capital outflows and rising political tensions with the West.

China’s onshore fund management market saw a muted 6 per cent growth in assets last year after a 1 per cent rise in 2022, slowing down from an annual jump of more than 27 per cent in both 2020 and 2021, according to the country’s asset management association. REUTERS