China Sea Fund has shrunk by 62% in 5 years; after 22 years of investment, Guolian Minsheng plans to sell its stake. Chengdu State-owned Assets will acquire the assets for 153 million yuan.

Summary of Key Points

Guolian Minsheng (the entity resulting from the merger of Guolian Securities and Minsheng Securities) plans to sell its 33.409% stake in Zhonghai Fund and, together with Société Générale de Crédit S.A. (Societe Generale), transfer a combined 58.409% stake to Chengdu Jiaozixing Group (a company backed by local state assets) for a total transaction value of RMB 267 million (RMB 153 million from Guolian's share). Guolian's decision to sell the shares is driven both by regulatory requirements regarding the “one participant, one controlling stake” rule and by the poor performance of Zhonghai Fund. Chengdu Jiaozixing Group’s acquisition is aimed at obtaining a public offering (public fund) license, marking the first time local state assets have obtained such a license in the region. Zhonghai Fund has seen its scale shrink by 62% in the past five years, with significant fluctuations in profitability. Whether the new shareholders can turn the situation around remains a focal point. The transaction is still subject to approval from the China Securities Regulatory Commission (CSRC) regarding the qualifications of Chengdu Jiaozixing Group as a shareholder, which introduces uncertainties.

I. Guolian Minsheng’s Sale of Shares: Both Compliance with Regulations and Getting Rid of a Burden

There are two main reasons for Guolian Minsheng to sell its stake in Zhonghai Fund:

1. Regulatory Requirements: According to the “one participant, one controlling stake” rule for public funds, the same entity is allowed to control at most one public fund and hold shares in no more than two others. After the merger, Guolian already holds a controlling stake in Guolian Fund (75.5%) and Minsheng Fund (which has not issued any products but still holds a controlling stake); holding another stake in Zhonghai Fund would violate the regulations.

2. Zhonghai Fund as a Burden: Zhonghai Fund’s performance has been poor in recent years, with its scale declining from RMB 21.9 billion in 2021 to RMB 8.2 billion (a 62% reduction), and it has incurred losses for three out of the past six years (RMB 20 million in 2022 and RMB 70 million in 2023). Guolian has borne part of these losses, amounting to RMB 6.11 million and RMB 21.02 million in 2022 and 2023, respectively. Selling the shares not only gets rid of this source of loss but also generates an pre-tax profit of RMB 80 million (equivalent to 3.24% of Guolian’s total profits for 2025), making it a profitable move.

II. Chengdu Jiaozixing Group’s Acquisition: Obtaining a Public Offering License and Strategically Positioning for the Western Financial Center

Chengdu Jiaozixing Group is a subsidiary of local state assets, and this acquisition serves a specific purpose:

• Lack of a Public Offering License: While the group already owns licenses for banking (Chengdu Bank), insurance (Jintai Insurance), and securities (Guojin Securities), it does not have a public fund license. By acquiring 58.4% of Zhonghai Fund, it will obtain this license, completing its local financial sector’s infrastructure.
• Strategic Initiative: This move is an important step in Chengdu’s efforts to build itself into a Western financial center. Previously, Sichuan Province only had provincial-level public funds; with the addition of a municipal-level one, the province’s state-owned asset portfolio in the public fund sector becomes more comprehensive, enhancing its ability to support the real economy.

III. Zhonghai Fund’s Current Situation: A 60% Reduction in Scale and Poor Performance

Zhonghai Fund’s current situation is quite dire:

• Significant Scale Reduction: The fund’s assets peaked at RMB 21.898 billion in 2021 but have now dropped to RMB 8.251 billion, a 62% decrease. Specifically, the stock fund portion has shrunk from RMB 14.168 billion to RMB 4.273 billion, the money market fund from RMB 6.58 billion to RMB 585 million, while the bond fund has increased slightly from RMB 885 million to RMB 2.547 billion, which is not enough to support the overall performance.
• High Profitability Fluctuations: The fund has lost money for three out of the past six years, with the largest loss in 2023 (RMB 69.98 million). Although it made a profit of RMB 4.43 million in 2025, its revenue decreased by 10.83% year-over-year, indicating weak overall profitability. The brokerage income that Guolian receives from Zhonghai Fund is only RMB 796,500, accounting for a mere 0.04%, which is negligible.

IV. The Evolution of Guolian Minsheng’s Investment in Zhonghai Fund: From Desire to Control to Complete Disposal

The relationship between Guolian Minsheng and Zhonghai Fund dates back to 2004:

• Initial Investment: In 2004, Guolian Securities invested RMB 49 million and sold its stake for RMB 153 million 22 years later, achieving a 212% return, which is not considered a loss.
• Challenges in Controlling the Fund: There were several attempts to gain control. In 2017, Guolian tried to sell all its shares but failed; in 2020, it aimed to acquire a 25% stake in Societe Generale but was thwarted due to Zhonghai Trust’s pre-emptive right to purchase; in 2023, Guolian acquired Zhongrong Fund (now known as Guolian Fund) and obtained a public offering license, after which Zhonghai Fund lost its value to Guolian, leading to the decision to dispose of its stake.

V. Uncertainties Remaining in the Transaction: Waiting for CSRC Approval

Although the contract has been signed, the transaction is not yet finalized:

Chengdu Jiaozixing Group must obtain approval from the CSRC to become a shareholder of Zhonghai Fund. This step is crucial; if it fails, the deal will fall through. However, Chengdu Jiaozixing Group has expressed its willingness to cooperate fully with the approval process and aims to complete the transfer as soon as possible. Whether the new shareholders can bring in resources (such as channels or funds) to help Zhonghai Fund overcome its difficulties remains to be seen.

In summary, this transaction represents a win-win situation for Guolian Minsheng, which complies with regulations and gets rid of a burden, and for Chengdu Jiaozixing Group, which acquires a public offering license and strategically positions itself in the Western financial center. However, the future of Zhonghai Fund remains uncertain. It will be interesting to see whether the new shareholders can revive this fund, which has seen its scale shrink by 60%.