The China Securities Regulatory Commission (CSRC) announced the move, which it said was agreed at the US-China Strategic and Economic Dialogue (SED) held in June in Beijing, the news site reported.
The overseas shareholders of a firm must be approved by the financial regulators in their own company in order for the firm to be registered in China. Once registered, they will be granted a licence to invest, China News reported.
"The new move can attract more excellent asset management institutions from abroad to enter the Chinese market and thus diversify participants in the capital market. It also deepens the opening up of the Chinese capital market," said Zhang Xiaojun, a spokesman for the CSRC, according to China Daily.
At the SED meeting, the Chinese government committed to gradually increasing the proportion of qualified foreign financial institutions with shareholdings in securities firms and asset management companies, the China Daily report said.
Shanghai-based Yan Geng of Pinsent Masons, the law firm behind Out-Law.com, said that there will be strict requirements in place for foreign investors and the process for authorisation will be a slow one.
"It will take a long time for any such company to establish itself and be able to operate in China," she said.