Canada's Manulife Financial Corp moved closer toward taking full control of its funds joint venture in China after regulators there accepted an application for the ownership change, two sources with knowledge of the matter told Reuters.

Manulife, Canada's largest life insurer, is seeking to bolster its presence in China's $3.8 trillion funds market, which grew 27% in 2021 and is forecast by consultancy McKinsey to more than double by 2025.

China's securities regulator officially accepted a recent application from Manulife's asset management arm to increase its stake in the joint venture to 100% from the current 49%, said the sources.

Manulife shares fell 0.2% to C$22.46 at midday in Toronto, compared with a 0.85% decline in the Toronto stock benchmark.

Manulife Investment Management acquired the stake in Manulife Teda Fund Management in China in 2010 from ABN AMRO bank and teamed up with state-owned Tianjin TEDA International Holding, which owns the remaining 51% equity but is looking to sell it.

The move furthers Manulife's stated goal of expanding both its Asian and asset management units, and its intention to deploy more capital in China.

Foreign companies are jockeying for position as China opens up the financial services sector, from investment banking to insurance, to global competition.

Manulife Investment Management and Manulife Teda Fund Management spokespeople declined to comment.

Since ownership caps for foreign companies in fund management JVs were scrapped in 2019, a growing number of foreign asset managers, including BlackRock and Fidelity, have set up operations in China to compete for a share of the country's swelling mutual funds market.

The official acceptance of Manulife's application by the China Securities Regulatory Commission (CSRC) means the Canadian company is "a step closer" to taking full control of the venture, which had around 60 billion yuan ($8.96 billion) in retail fund assets as of March. An approval could come soon, although the timing is unknown, one of the sources said.

A CSRC public disclosure on May 22 shows it had made a decision on whether it would consider a Manulife Teda application to change more than 5% ownership, but does not reveal its decision.

The CSRC did not respond to a request for comment.

HIRING CEO

Besides the fund management joint venture in China, Manulife also has a 51% stake in an insurance joint venture with Sinochem, and has been open about its aspiration to increase its share of that as well.

Manulife's Asia CEO told Reuters earlier this month the regional unit was on track to account for half of the Canadian insurer's core earnings by 2025 despite economic slowdowns and impact of COVID-19 on its key markets.

The change at the fund venture got underway in July last year when Tianjin TEDA put its stake on the block for around $263 million, one of the sources said.

The venture is also in the final stages of tapping the general manager of a rival foreign fund in China to head its operations, one of the sources said.

JPMorgan became the first global bank that filed with the Chinese regulator last year to convert its local fund joint venture into a wholly owned business, which has yet to receive regulatory approval.

($1 = 6.6970 Chinese yuan renminbi)