Xiangcai Securities Co signed a co-operative agreement with the Netherlands-based ABN AMRO on Monday, Jan 12, 2004, to form a strategic partnership with the foreign bank.

The two sides will conduct comprehensive co-operation in product innovation, equity investment, asset management and personnel training, according to the agreement signed in Beijing.

That will push the partnership to an even higher level and bring more mutual benefits, officials of both companies said.

ABN AMRO already got the regulators' approval last September to buy 33 per cent stakes in the former Xiangcai Hefeng Fund Management, the asset management arm of Xiangcai Securities.

The joint venture was renamed as ABN AMRO Xiangcai Fund Management Co yesterday, after months of trial operation.

It would take two to four years for the venture to become profitable, according to Samuel Zavatti, senior executive vice-president and global head of financial institutions & public sector of ABN AMRO.

With rich expertise in asset management, ABN AMRO will send more of its international staff to China to help with product design and management and also train Chinese staff overseas, he said.

It will also work together with the Chinese partner to develop new fund product both for the mainland and overseas markets.

The co-operation will be focused on asset management now, though ABN AMRO may also extends its Chinese alliance in other sectors or with other partners when opportunities arise, he said.

As the Chinese economy becomes stronger and the market opens wider, foreign investors are getting increasingly interested in China's capital market, said Tu Guangshao, vice-chairman of the China Securities Regulatory Commission (CSRC), at the signing ceremony yesterday.

"Though China's capital market is still not the biggest, its potential of growth is certainly enormous," he said.

The authorities would also open up more sectors for foreign investors, following the launch of some Sino-foreign fund management and securities joint ventures, he said.

How to ensure the smooth operation of such joint ventures, however, is another crucial issue after the door is open.

Over the past few years, there have been cases when years of negotiation between the Chinese and foreign securities businesses did not come up with any fruitful result.

For the alliance between ABN and Xiangcai, it also took almost three years to get the deal finalized and approved. But their common values and business principles did help them get through the hard times and would continue to support their growth, according to Frank Kusse, chief executive officer of ABN AMRO Asset Management (Asia) Ltd.

For example, the mutual fund business had experienced difficulties over the past year as the stock market indices moved downwards and affected the returns for the equity investment.

However, with quick adjustment of investment strategy and product design, ABN AMRO and Xiangcai did manage to improve the performance of their jointly-developed umbrella funds, which have started to pay dividends.

Chen Xuerong, chairman of Xiangcai Securities, said the co-operation with the foreign companies is a way to increase its own strength and keep a sound foothold in the market in the intensifying competition.

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