China's planned deregulation in October of its fund distribution business has drawn interest from both independent advisers and locally-incorporated foreign banks, as they eye a slice of the market dominated by Chinese banks.

Financial websites including Eastmoney.com , hexun.com as well as wealth management advisers Howbuy and Noah Holdings all plan to apply for licences, while China subsidiaries of foreign banks such as HSBC are also actively preparing for the business.

About 60 percent of mutual funds in China are distributed through bank outlets every year, with the remainder sold by brokerages and by fund houses themselves. Starting Oct. 1, locally-incorporated foreign banks and independent third-party distributors can apply to enter the business.

Bank channels in China are too crowded so deregulation would create opportunities for new players, said Zhang Yu, fund analyst at Sinolink Securities.

Taking advantage of their far-reaching retail networks, state lenders such as Industrial and Commercial Bank of China , Bank of China and China Construction Bank have been able to secure high commissions from fund sales, squeezing the fund industry's profitability.

Eastmoney.com, which claims to have one of the biggest online communities of Chinese retail investors, plans to distribute mutual funds online and charge lower commission rates.

The company said in July that it would increase investment in its advisory unit, which would start mutual fund sales.

Fund consultancy Howbuy and Noah have all said they aim to be the first companies to win new licences for fund sales.

Some analysts, however, are sceptical that third-party fund sellers would thrive in China.

I don't think they control a big enough customer base to establish sound partnership with mutual fund houses, said Howhow Zhang, head of research at fund consultancy Z-Ben Advisors. Banks will still be the main channel of fund sales, and I don't think their dominance would be challenged in the short term.

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