Wall Street dips back into China as Beijing opens doors

Global investment firms are pushing back into mainland China after Beijing pledged to approve applications from all foreign financial institutions to operate in the country.

Citi received China’s approval to operate a wholly owned securities company last month, and CEO Jane Fraser is kicking off the bank’s annual China conference this week in Shanghai, CNBC reported. The conference is the latest sign that Wall Street is betting on China’s $27 trillion in domestic wealth, even as the political relationship between Washington and Beijing remains fragile.

The push comes after the Trump-Xi summit in September, where China made the pledge to open its financial sector. It also comes after years of retreat. BlackRock shut down its three-year-old China Innovation Fund in late 2025, which only had $31.7 million in net assets. Vanguard in 2023 sold its stake in a mainland China mutual fund operator to majority owner Ant Group. The firms now re-entering the market are doing so with the memory of those failures, and the question is whether the opening is real enough to justify the cost of building a local presence.

The wealth opportunity

Mainland Chinese with more than $125,000 in bankable assets hold a combined $27 trillion in wealth, according to financial analytics firm Crisil Coalition Greenwich. The millionaire population has surged to nearly 4 million, up from 1 million a decade ago.

“The environment is meaningfully more open than it was a decade ago, although it remains highly regulated,” said Nuno Cordeiro, head of wealth management, and Fabio Zheng, senior product manager, wealth management, at Crisil Coalition Greenwich. They pointed out that the property market slowdown has created greater demand for diversification and advisory services.

“The question today is no longer whether foreign firms can participate. It is whether they can generate sufficient scale and returns within those constraints,” they said in an email. “Consequently, most successful strategies combine greater local presence with partnerships that provide access to domestic distribution.”

The $27 trillion figure is the draw. China’s property market has been in decline for three years, and the wealth that was parked in real estate is looking for new homes. Foreign financial firms with the ability to offer global diversification, advisory services, and access to U.S. and European markets are positioning to capture that flow, and the opening from the Trump-Xi summit gives them the regulatory path to do so. The question is whether the path is wide enough to build a profitable business.

Partnerships and localization

Franklin Templeton, which oversees $1.8 trillion in assets, and ChinaAMC, which manages over 3.1 trillion yuan ($462.5 billion), signed a strategic partnership on Oct. 28 for sharing market insights and jointly developing products. They are already working on co-branded ETFs across Hong Kong, U.S. and European fund structures.

The deal goes both ways. “Just as a lot of international investors are interested in China investment, Chinese investors are looking for global investment vehicles,” Sherrie Dai, managing director, global capital, at ChinaAMC, told CNBC. A Hong Kong-listed ETF launched with Franklin Templeton on Sept. 29 holds around 40% U.S. stocks and 60% Hong Kong-listed ones. Such products could, in six to 12 months, meet Beijing’s threshold for letting mainland China-based investors participate.

The partnership model is the lesson from the failures of BlackRock and Vanguard. Peter Alexander, founder and managing director of Z-Ben Advisors in Shanghai, attributed part of the challenge to “micromanagement” from headquarters outside China. “Global groups have failed in China due solely to their inability to make the necessary adjustments to how it is they operate to best fit the Chinese market,” he said.

The firms that succeed are the ones that combine local presence with domestic partnerships, rather than trying to export a Western business model into a market that does not reward it. Franklin Templeton’s deal with ChinaAMC gives it access to local distribution and product expertise, while ChinaAMC gets access to Franklin’s global fund infrastructure. The co-branded ETFs are the first output, and the six-to-12-month timeline for mainland participation gives the partnership a concrete milestone to work toward.

The market reality

Since early 2025, DeepSeek’s AI breakthroughs and other Chinese tech advances have gained foreign investors’ attention. U.S.-based Roundhill Investments included China stocks in its thematic ETFs focusing on humanoids, memory chips and other tech. But performance has not helped. Chinese stocks have tumbled this year, significantly underperforming their U.S. peers, CNBC reported.

Capital controls, a state-dominated system and varying levels of investor communication contribute to a mainland Chinese stock market quite different from that of the U.S. State-linked funds, known as the “National Team,” often step up stock purchases to limit market sell-offs. Last week, amid reports of a pause in new Chinese IPOs, a senior financial regulator warned in a speech that too much capital concentration in tech can drive up borrowing while crowding out traditional industries.

Liqian Ren, a quantitative manager at U.S.-based fund manager WisdomTree, said that for longer-term investors, rapid price surges raise the risk that they are “buying at the top.” High volatility means those investors can only hold a certain amount of Chinese stocks due to perceived risk. The market “becomes a trading vehicle. That’s not necessarily good for China,” she said.

What I think

The opening is real, but the optimism should be tempered by the track record. BlackRock and Vanguard tried to build China businesses and retreated, and the reasons for their retreat have not changed. The regulatory environment is still controlled by a state that prioritizes stability over returns, the stock market is still dominated by state-linked funds that can override price discovery, and the political relationship between Washington and Beijing is still capable of deteriorating on a single headline. The firms going in now are betting that the Trump-Xi summit created a durable opening, and that is a bet that has been made before and lost.

The $27 trillion in wealth is the number that justifies the effort. Even a small share of that market would be a meaningful business for a global financial firm, and the property market decline is creating demand for the kind of diversification and advisory services that foreign firms are good at providing. The Franklin Templeton partnership with ChinaAMC is the model that is most likely to work, because it combines local distribution with global product expertise, and the co-branded ETFs give both firms a concrete revenue stream. The firms that try to go it alone will struggle with the same micromanagement and localization problems that sank BlackRock’s fund.

The political risk is the one that cannot be hedged. The Democratic sweep in the midterms raises the temperature on China policy, and the Nvidia scandal is going to make tech competition between the two countries more contentious. If the relationship deteriorates, the regulatory opening could narrow, and the firms that have invested in building local presence will find that their access is contingent on a political mood that can change quickly. The Trump-Xi summit created the opening, but Trump’s political position is weaker after the midterms, and the Democrats who will control Congress are more hawkish on China than he is.

The right strategy for Wall Street is to go in through partnerships, keep the investment modest, and be ready to pull back if the political environment turns. The firms that treat the opening as a long-term commitment will be disappointed if it narrows, but the firms that treat it as an opportunity to build relationships and capture a share of the wealth flow will find that even a constrained market is worth the effort. The $27 trillion is not going anywhere, and the firms that establish a presence now will be better positioned when the next opening comes, whenever that is.