Despite these risks, the big players in global custody are spending a lot of time and money making sure they have the right connections and relationships in place when the gates open.
"It's very much a relationship-driven market," said one asset-servicing executive, who asked not to be named. "It's called ‘guanxi' — who you know and what you know. That really drives the decision to hire or fire. So it's very important we establish a physical presence in China to be able to build the types of networks and connections necessary to build a business there."
Mr. Bailey said his firm recently hosted an informational meeting with a Chinese insurance company to help officials from the company better understand offshore investing.
"The biggest challenge for us and other custodians is that regulators have been reviewing what's best for China and its insurance companies, reviewing best practices around the world," he explained. "But sometimes you take what you think are the best bits from each country and when you put them together, it's not a portable solution. So insurance companies have been taking advantage of the opportunities that have been offered to them."
Similarly, Northern Trust's Mr. Tan, who will move to Beijing when the firm opens its representative office there, said he and other Northern Trust officials have spoken at industry conferences, including one organized by China's Central Depository for Fixed Income.
He said he is planning to hire Chinese staff in Beijing "to lay the foundation for our sales people and relationship managers from other locations to come in and provide servicing or sell products. The staff of the representative office by law will not be allowed to provide any operational or revenue-generating services, just the foundation and facility."
State Street is taking a different tack.
"Unlike many companies, we're not putting a lot of capital into China," Mr. Tse said. "It's myself and a couple of staff in Hong Kong who fly to Beijing and Shanghai regularly. The reputation we're building has helped, and so far we're quite glad to have done it."
Much of the work being done by non-Chinese banks is helping local custodians stay as current as possible on best practices in the industry. The non-Chinese bank executives are betting that helping local custodians do their job better will help their own banks down the road in capturing both global custody mandates and domestic custody — if and when the government allows it.
Regardless of their method or the business they are trying to capture, non-Chinese banks are taking a long view of the market and its potential opportunities.
Mr. Tse said that given China's 1.3 billion population, a burgeoning middle class and the quick adoption of modern investment — and pension — management techniques, China's mutual fund and pension industry will be one of the world's largest within 10 years.
"It's a very long-term market," said Nadine Chakar, chief executive officer of ABN AMRO-Mellon, based in Amsterdam. "Both Mellon and ABN AMRO, and through them ABN AMRO-Mellon, are very engaged in China. We view that as the next frontier."
She said she is close to closing one joint venture — which she declined to detail — that is likely to provide ABN AMRO Mellon with a small revenue stream. But she sees more opportunity years down the road.
"There are opportunities that are not going to materialize in the next two or three years, so we're taking a long-term approach," she said.