Goldman Sachs Racing to Be First With 100% of China Venture

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Goldman Sachs Group Inc. is inching closer to becoming the first Wall Street bank with 100% ownership of its securities joint venture in China, paving the way for an aggressive expansion as the Asian nation opens its $50 trillion financial market wider to foreign firms.

The New York-based bank has started the process of getting clearance from regulators to take full control of Goldman Sachs Gao Hua and signed a definitive agreement with its partner to buy the 49% of the venture it doesn’t own, according to an internal memo. A Hong Kong-based spokesman at Goldman Sachs confirmed the contents.

The move will end Goldman Sachs’ 17-year collaboration with Beijing Gao Hua Securities and gives the firm free rein to pursue an expansive growth strategy that includes boosting its workforce in China to 600 and ramping up in asset and wealth management. Wall Street giants are rushing to gain a bigger foothold as China’s market opens, jostling to capture a share of profits that are estimated to swell to $47 billion in investment banking alone by 2026.

Full ownership “of our franchise on the mainland represents a significant commitment to and investment in China,” Chief Executive Officer David Solomon, President John Waldron and Chief Financial Officer Stephen Scherr said in the memo.

The internal announcement comes amid rising tension between China and the U.S., with sanctions being imposed on a string of Chinese officials and restrictions on investments. U.S. lawmakers have also started to question the push by big banks into China, which is counting on investments to help transform its export-led economy.

Others are also gunning for full ownership, including JPMorgan Chase & Co., which last month boosted its stake in its venture to 71%. JPMorgan has already obtained approval to take full ownership of a futures venture in the country.

The time period of the application process in China is unclear, but it took Goldman Sachs about seven months to win the nod for majority control.

Taking full control in China would bring the firm closer to its vision of being “one Goldman” in all markets. As part of the progression to full ownership, the firm will migrate all onshore businesses currently under Gao Hua across to the venture, which will be renamed Goldman Sachs (China) Securities Co. Ltd.

That includes moving its non-investment banking businesses such as wealth management and securities trading into the new wholly owned company. The current venture handles advising companies and stock and bond issuance.

©2020 Bloomberg L.P.

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