China's banking watchdog has approved an asset management joint venture, in which France's AXA will take a 39 percent stake, AXA's local partner Pudong Development Bank said.

Shanghai-based Pudong Bank, in which Citigroup Inc. holds a stake of about 4 percent, said it will own 51 percent of the joint venture. Shanghai Dragon Investment Co. Ltd., an investment arm of the city government, will take a 10 percent stake in the venture which will be based in Shanghai, China's financial hub.

However, its launch is also subject to approval from the China Securities Regulatory Commission (CSRC), the country's top securities regulator, which Pudong Bank said it hasn't obtained. Pudong Bank didn't give a timeframe for the joint venture's launch. Last November, the launch may hinge on the regulatory issue of whether Pudong Bank's top shareholder would be investing too much in the fund sector.

State-owned Shanghai International Group, an investment arm of the Shanghai city government, is the top shareholder in Pudong Bank with about 20 percent. Shanghai International already owns big stakes in two other fund management firms in China, either directly or through its unit Shanghai International Trust and Investment Co.

According to CSRC regulations, a single domestic or foreign investor cannot invest in more than two fund management companies, and can only have a controlling stake in one of those. Last September, Anthony Fasso, Asia Pacific Chief Executive of AXA Investment Managers said he expected the fund joint venture with Pudong Bank to win regulatory approval "in the next three to four months".

The registered capital of the fund venture is 200 million yuan ($25.73 million), Pudong Bank said. Last December, Pudong Bank signed a memorandum of understanding with France's top lender BNP Paribas to establish an insurance joint venture in China, but has yet to apply to local regulators for approval.