Goldman Sachs seeks 100% control of China securities venture
Goldman Sachs is set to take full ownership of its securities joint venture in China, as Western investment banks seek to expand their presence across the country’s booming financial industry.
The US bank has signed a definitive agreement and initiated regulatory processes to acquire all of the outstanding shares in Goldman Sachs Gao Hua from its local partner, Beijing Gao Hua Securities, according to an internal memo seen by the Financial Times on Tuesday. It currently holds 51 per cent in the venture.
Wall Street’s biggest firms have rushed to boost their presence in China as the country opens up its financial system to foreign investment. That long-term shift has gathered pace this year despite escalating geopolitical tensions between Beijing and Washington.
“100 per cent ownership of our franchise on the mainland represents a significant commitment to and investment in China,” Goldman Sachs said in the memo, which was signed by chief executive David Solomon and other senior leaders. It pointed to “ongoing reforms under way in China’s capital markets, continued robust economic growth and the expanding needs of increasingly sophisticated clients”.
Foreign firms have been able to apply for full ownership in China as of April this year, following a decades-long push to increase their presence.
Goldman Sachs set up its joint venture, the first of its kind in the country, in 2004.
In 2018, UBS became the first foreign bank to increase its stake in a securities joint venture to 51 per cent. In March this year, both Goldman Sachs and Morgan Stanley received approval to acquire majority stakes in their securities joint ventures. Goldman Sachs said at the time that it planned to move to full ownership at the “earliest opportunity”.
JPMorgan in October took its stake in its securities joint venture to 71 per cent after it last year became the first US bank to obtain approval for majority ownership. Chief executive Jamie Dimon has said that China is “a critical market for many of the company’s domestic and global clients”.
This year Beijing has unveiled government reforms that encourage financial liberalisation, including expanding foreign access to futures markets.
The Chinese government has also taken steps to open up the country’s mutual fund industry. JPMorgan this year became the first foreign firm to reach an agreement to take full ownership of its mutual fund joint venture, which is pending regulatory approval.
“I think the view of most Wall Street firms is China is a large market, it’s going to continue to get bigger, the opportunities for foreign firms will be larger, and therefore they want to have a footprint in that market,” said Fraser Howie, an independent analyst and expert on the country’s financial system.
“There’s clearly a lot of deals to be done in China, so even if foreigners only ever get crumbs off the table, that’s still a big table.”
China’s economy has returned to growth after it controlled its coronavirus outbreak. Its financial markets have boomed this year, with the CSI 300 index of Shanghai- and Shenzhen-listed stocks up 22 per cent. Foreign investors have also increased their exposure to China’s vast bond market, which has recently been unsettled by a series of defaults.
Additional reporting by Wang Xueqiao in Shanghai