UBS will hold a majority stake in the business unit, which, if finalised, will be China's first foreign majority-owned asset management joint venture with an insurer since it permitted majority foreign holdings in such partnerships in 2019.
China Life and UBS have signed a memorandum of understanding to set up the joint venture, the formal launch of which will be subject to approval from the China Banking and Insurance Regulatory Commission (CBIRC), said one of the sources.
Both sources declined to be identified on grounds of the confidentiality of the talks.
UBS declined to comment, while a spokesperson for China Life Insurance Co Ltd, the listed arm of China Life Insurance Group, did not respond to Reuters request for comment.
China has been stepping up efforts to open up its financial sector, worth trillions of dollars to help lure in more foreign investment and shore up the economy, amid rifts with the United States.
A string of foreign financial firms have been in talks for, or have set up, majority-owned asset management businesses in the country in the last couple of years, lured by the prospects of increasing wealth despite near-term economic challenges.
BNP Paribas' asset management arm is in talks to form a wealth management venture with a unit of Agricultural Bank of China, Reuters reported in September, as the French firm pursues a bigger slice of the market.
UBS' talks to form a new China asset management venture come after its failed attempts this year to seal a similar deal with a wealth management unit of a state-owned Chinese bank, said the two sources.
"UBS has been keen to take an absolute-controlling status in a China unit, but its competitors are quick to snap up the best local partners," said the first source.
A total of 31 insurance asset management companies in China ran 18.7 trillion yuan ($2.94 trillion) in assets by September, data from the regulator, CBIRC, shows.
The planned joint venture with China Life will further bolster the presence of UBS in China, a market where it already has presence in brokerage, investment banking and wealth management businesses.
The bank has a stake of 49% in UBS SDIC Fund Management, an onshore fund management joint venture, via an acquisition in 2005, which had 149 billion yuan in retail fund assets by Nov. 18.
In 2016, UBS's asset management unit set up a wholly-owned private fund management unit, which caters to wealthy individuals and institutional investors, with assets worth more than 2 billion yuan.
The scope of operations of the planned joint venture with China Life has not yet been finalised and deliberation with regulators is underway, the sources said.
The state-owned China Life Group is China's largest insurance group, with 4.5 trillion yuan in total assets under management as of 2020, mainly linked to its arm, China Life Asset Management Company.
($1=6.3664 Chinese yuan renminbi)
(Reporting by Selena Li; Editing by Sumeet Chatterjee and Clarence Fernandez)
By Selena Li