Saturday, December 9, 2023

Goldman Sachs seeks 100% control of Chinese company

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Goldman Sachs is set to take full ownership of its joint venture in securities in China, as Western investment banks seek to expand their presence in the country’s burgeoning financial industry.

The U.S. bank has signed a definitive agreement and initiated regulatory processes to acquire all of the outstanding shares of Goldman Sachs Gao Hua from its local partner, Beijing Gao Hua Securities, according to an internal memo seen Tuesday by the Financial Times. He currently owns 51 percent of the company.

The biggest companies on Wall Street have rushed to strengthen their presence in China as the country opens its financial system to foreign investment. This long-term change accelerated this year despite the intensification of geopolitical tensions between Beijing and Washington.

“100% ownership of our franchise on the mainland represents a significant commitment and investment in China,” Goldman Sachs said in the memo, which was signed by CEO David Solomon and other senior executives. He pointed to “the ongoing reforms in Chinese capital markets, the pursuit of robust economic growth and the growing needs of increasingly sophisticated clients.”

Foreign companies were able to apply for full ownership in China from April of this year, after decades of efforts to increase their presence.

Goldman Sachs created 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%. In March of this year, Goldman Sachs and Morgan Stanley received approval to acquire controlling interests in their joint ventures in securities. Goldman Sachs said at the time that it planned to transition to full ownership at the “first opportunity.”

In October, JPMorgan increased its stake in its securities joint venture to 71% after becoming the first U.S. bank to gain majority stake approval last year. CEO Jamie Dimon has said that China is “a critical market for the company’s many domestic and global customers.”

This year, Beijing unveiled government reforms that encourage financial liberalization, including expand foreigners’ 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 company to enter into an agreement to take full ownership of its mutual fund joint venture, which is awaiting regulatory approval.

“I think most of the Wall Street companies consider China to be a big market, it will continue to grow, the opportunities for foreign companies will be greater and therefore they want to have a footprint in this market,” said Fraser Howie. , independent analyst and expert on the country’s financial system.

“There are clearly a lot of deals to be made in China, so even though foreigners only take crumbs off the table, it’s still a big table.

The Chinese economy has returned to growth after controlling its coronavirus outbreak. Its financial markets have exploded this year, with the CSI 300 index of stocks listed in Shanghai and Shenzhen rising 22%. Foreign investors have also increased their exposure to the vast Chinese bond market, which was recently disrupted by a series of defaults.

Additional reporting by Wang Xueqiao in Shanghai


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