Morgan Stanley (NYSE:MS) has cut 9% of its employees at its asset management business unit in China as part of its strategy to navigate the nation’s economic slowdown and market uncertainties. The job cuts, which began in December 2023, have affected nearly 15 employees at Morgan Stanley Investment Management China.

This is the first instance of staff reduction in the China fund unit since Morgan Stanley acquired its local partner’s 36% stake for $54 million in 2023 and rebranded the unit as a wholly-owned subsidiary in June.

The assets under management of Morgan Stanley Investment Management China have declined every quarter since reaching a peak in June 2021, resulting in a 53% decrease by the end of 2023. The unit reported an operating loss of 48.5 million yuan in 2022 and 23.2 million yuan in the first half of 2023, based on the earnings results of its former joint venture partner, Huaxin Securities.

To lead the unit, Morgan Stanley hired Alex Zhou as chief investment officer, marking the first time the China unit has had such a position.

The staff reductions and the hiring of Zhou are part of Morgan Stanley Investment Management China’s efforts to restructure its business after becoming a wholly-owned subsidiary.

China’s stock markets have been affected by the country’s economic challenges, including a debt crisis in the property sector and a lack of significant government stimulus. The benchmark CSI 300 index fell to five-year lows last month after declining 11% in 2023.

Investors are withdrawing billions of dollars from China’s actively managed equities funds, reversing two decades of investment in the country’s growth story.

While Beijing has taken measures to support the stock market and address economic issues, including pushing state-controlled funds to buy stocks and curbing short-selling, a full recovery of the stock market requires a more substantial response to the property crisis.

Last month, the Wall Street Journal reported that Morgan Stanley planned to lay off hundreds of workers from its wealth management division, affecting less than 1% of the unit’s employees. The move is part of the firm’s efforts to reduce costs amid economic uncertainty and concerns about the Federal Reserve’s interest rate cuts.

Morgan Stanley has been focusing more on its wealth management segment in recent years, which is less dependent on capital markets and provides a more stable revenue source. The segment became a significant profit-making unit for the firm following acquisitions of Eaton Vance and E*Trade Financial.

The job cuts are among the first major moves by Morgan Stanley’s newly appointed CEO, Ted Pick. Over the past six months, Morgan Stanley shares have gained almost 1% compared to the industry’s 13.2% growth.

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