US-based asset management firm Van Eck is set to suspend its plan to set up a mutual fund business in China amid concerns in the market, Reuters has reported citing three sources privy to the development.

The move represents the first of its kind taken by an overseas asset manager after applying for mutual fund license in China.

It comes in the midst of growing tensions between the US and China, creating apprehensions among foreign entities about the future of their businesses in the second largest economy in the world.

In December last year, Van Eck’s board decided to drop its plan to enter China’s mutual fund sector, which is estimated to be $3.8tn in size, two unnamed sources told the publication.

The firm, which has $69bn in assets under management, has been undertaking works for its China mutual fund unit for around two years.

Doubts over Sino-US relations and postponement in introducing the unit as a result of Covid19 pandemic have been the major reasons behind the decision, added one of the sources.

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The war in Ukraine is also one of the reasons for Van Eck to withdraw the plan. The firm was compelled to close down its Russia-focused exchange-traded funds in December last year, said the source.

Van Eck refused to provide any update on the latest development.

In 2020, China eliminated restrictions on the ownership of foreign entities in its mutual fund sector and allowed various international asset managers, including BlackRock and Fidelity, to establish fully-owned retail fund arms in the country.

Van Eck then became one of the six initial applicants to apply for a license. The firm even made a CNY100m ($14.62m) commitment to start a business in Shanghai, according to official business registration data.