A complete retreat would follow Vanguard’s surprise move two years ago to scrap plans for a mutual-fund management license in China to focus on the BangNiTou tie-up with Ant that was launched in 2020.
Fidelity and Neuberger Berman Group have recently joined BlackRock in launching onshore funds through new wholly-owned units, while Manulife Financial Corp., JPMorgan Chase & Co. and Morgan Stanley have gained approvals to buy out local partners to gain full control of existing ventures.
The race for fund advisory is heating up with more players coming in, hurting profitability. Vanguard’s venture, which has been offering only products from competitors, booked a loss in 2021 that was much higher than an internal forecast made after it was set up in 2019, Bloomberg reported last year. Vanguard owns 49% of it.

Banking is a confidence trick. You put money in the bank today because you are confident you can take it out tomorrow; to you, a dollar that you have deposited in the bank is just as good — just as much money — as a dollar bill in your wallet. If you show up at the ATM at any time of day or night, you expect it to give you your dollars.
But the bank doesn’t just put your dollars in a box and wait for you to take them out; the bank uses its depositors’ money to make loans or buy bonds, and just keeps a little bit around for people who need cash. If everyone asked for their money back tomorrow, the bank wouldn’t have it.
But everyone is confident that, if they ask for their money back tomorrow, the bank will have it. So they mostly don’t ask for it, so when they do, the bank does have it. The widespread belief that banks have the money is what makes it true.
This is obvious stuff. Also obvious, and famous, is that it is an unstable equilibrium. If people stop believing it, it stops being true. If everyone stops believing in a bank, they will all rush to get their money out, and the bank won’t have it, and their lack of belief will be retrospectively justified. Whereas if they had kept believing, their belief would also have been justified.
Isn’t this ridiculous? But there is a deep social purpose to the confidence trick. Banking is a way for people collectively to make long-term, risky bets without noticing them, a way to pool risks so that everyone is safer and better-off.
You and I put our money in the bank because it is “money in the bank,” it is very safe, and we can use it tomorrow to pay rent or buy a sandwich. And then the bank goes around making 30-year fixed-rate mortgage loans: Homeowners could never borrow money from me for 30 years, because I might need the money for a sandwich tomorrow, but they can borrow from us collectively because the bank has diversified that liquidity risk among lots of depositors.
Or the bank makes small-business loans to businesses that might go bankrupt: Those businesses could never borrow from me, because I need the money and don’t want to take the risk of losing it, but they can borrow from us collectively because the bank has diversified that credit risk among lots of depositors and also lots of borrowers.
But the basic problem remains: the confidence trick, where trust in banks makes them trustworthy and distrust in banks makes them fail.
Bankers and bank regulators tend not to talk in these terms... because talking about it ruins the magic. But they know it in their bones; at a deep level they understand that preserving that confidence is their most important job.
More specifically they know that if there is a run on a bank, and that bank goes bust and doesn’t pay depositors, then there will be a run on other banks. And they know that the run can start with a bank that is bad, that is undercapitalized and made poor decisions and in some sense deserves to fail, but that it can spread to other banks that are good.
And they know that “good” and “bad” are not really the things that matter: What makes a bank good is not just its capital ratios and liquidity position but also confidence, and however good the ratios it is hard for a bank to survive a loss of confidence. They know that they are all interconnected, that they are players in an essentially social game, and that the goal of the game is not to win but to keep playing.