Goldman Sachs Buys Out Its Chinese Joint Venture

(Noted News) — Goldman Sachs Group Inc. has almost become the first bank on Wall Street to have 100% ownership of their joint securities arm in mainland China, catching the beginning of the rise of Asia’s financial markets. 

Previously a near 50/50 cooperation with Beijing’s Gao Hua Securities for the past 17 years, this update in ownership will give the New York megabank free reign to do business in China and pursue an aggressive expansionist campaign into the area, including the hiring of 600 new employees to build up an asset management division. 

A joint statement from CEO David Solomon, Chief Operating Officer John Waldron, and Chief Financial Officer Stephen Scher noted that  “One hundred percent ownership of our franchise on the mainland represents a significant commitment to and investment in China.”

“This focuses on growing and strengthening our existing China businesses, expanding our addressable market, and investing in talent and technology…These efforts coincide with ongoing reforms underway in China’s capital markets, continued robust economic growth, and the expanding needs of increasingly sophisticated clients.”

The expansion into China is under Goldman’s “One Goldman Sachs” initiative, which aims to deliver a more global, singular structure of the firm. This initiative was conceived and accelerated under CEO David Solomon when he took over in 2019, calling it a “firmwide effort to simplify the way to engage with our clients and deliver all of our capabilities in a more holistic fashion.”

Though Goldman’s move is the first of its kind for an American bank, it likely won’t be the last. JP Morgan Chase also positioned itself to acquire 71% ownership of its joint venture in China, with aims to eventually get to 100%. CEO Jamie Dimon said China was a “critical market” for their global clients, hence a push by the bank to get regulatory permission to majority-owned securities joint venture, offering brokerage, investment advisory, and underwriting services.

In June, China’s central bank approved American Express to enter the Chinese market, making it the first foreign credit card company to conduct onshore operations in China. VISA and Mastercard are also awaiting approval for the same thing. 

The American financial industry’s vast move into China comes amid growing tensions between the two countries not just from a trade war, but from an increasing amount of allegations of Chinese infiltration of America, many leading to arrests.

White House economic advisor Larry Kudlow said on Monday that though there are no plans for additional tariffs on China before January, the Trump administration “remained engaged” in trade talks. 

“Data [shows] this, that China is abiding by a good chunk of the phase one trade deal…They may be behind because of the pandemic situation.”

“There seems to be some positive movement with respect to setting up new laws and new legal bodies, judiciary bodies, to stop the extraordinary theft of our intellectual property which was, as you know, a key part of our concerns.”

Unless Donald Trump’s legal teams can overturn at least 3 of the 5 contested states, president-elect Joe Biden should enter the White House with an agenda that will likely reverse most of the tensions with China, allowing for easier access to the Chinese market for companies in the financial services industry looking to expand there. 

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