HONG KONG, May 22 (Reuters) - Power Corporation of

Canada ( PWCDF ) (Power Corp) has shut its China investment unit

and dismissed all staff, said two people briefed on the matter,

becoming the latest Western financial firm to pull back amid the

country's economic challenges.

Power Sustainable, which is the asset management arm of

Power Corp and manages $4.5 billion of assets globally, started

laying off all of its 17 local staff in recent weeks as it moved

towards shutting down the Shanghai-based unit, said the people.

Economic slowdown has seen many of the Western financial

firms that scrambled to expand China operations a few years ago

take a hit on their earnings and rein in their ambitions for

what was a key piece of their global growth strategy.

The closure of Power Sustainable (Shanghai) Investment

Management, which was established in 2019 and invested in public

equities in China, was due to the group's change in strategy,

the people said, declining to be named as they are not

authorised to speak to media.

It is not immediately known how much assets the onshore arm

managed. The group utilised the platform to not only invest on

behalf of onshore clients but also offshore clients, one of the

two people said.

Power Sustainable made "a strategic decision as part of the

realignment of its (investment) management business to wind down

its China public equity strategy", a Montreal-based Power Corp

spokesperson told Reuters without commenting on local staff.

"We remain optimistic about China's future prospects and

economic growth," said the spokesperson.

Power Corp will remain invested in the country with

investments in mainland China's public equity markets through

its Qualified Foreign Institutional Investor (QFII) licence, the

spokesperson added.

A QFII licence allows offshore institutions to mostly invest

in China's listed securities without having to set up operations

in the country.

The Power group of companies has investments in China

through one of its subsidiary's 27.8% holding in China Asset

Management Company (ChinaAMC), China's second-largest mutual

fund manager.

Power Corp had in recent months turned more pessimistic

about the investment business amid China's faltering economic

growth and rising geopolitical uncertainties, the people said.

The unit's closure adds to a growing list of global

financial firms that have cut back their China business presence

or growth ambitions in the recent past, as prospects dimmed for

the world's second-largest economy.

Over the last two months, Fidelity International, Morgan

Stanley ( MS ) and Legal & General ( LGGNF ) have either sharply

cut China-focused jobs or have shelved expansion plans, Reuters

reported.