Goldman Sachs One Step Closer to Buy 100% of China Securities Venture

Other global investment banks seek a bigger controlling stake in its Chinese business under the new rules.

Goldman Sachs has reportedly signed an agreement to take its holdings in Beijing-based Goldman Sachs Gao Hua Securities from 51 percent to 100 percent. If approved, the US bank would become the latest global lender to take advantage of Beijing’s commitment to ease foreign-ownership restrictions, even amid increasing geopolitical tensions with the United States.

UBS was the first foreign-controlled brokerage approved by the securities regulator to upgrade its ownership in a local joint venture to controlling stake since the mitigated rules were implemented in late 2017.

Goldman Sachs has been discussing the offer with its partner in China, Fang Fenglei, and his associates as regulators vowed to speed up the process allowing banks, securities companies, asset managers and insurers to take majority stakes and full ownership of their local operations.

Moreover, JPMorgan has applied to win an auction to purchase the shares needed for a 70 percent majority equity stake in its Chinese futures joint venture. The lender was bidding for an extra 20% stake in its mainland business, J.P.Morgan Futures Co., a joint venture between the bank and its local partner.

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Door Opens for $50 Billion Cake

China has repeatedly pledged to open its financial markets, including allowing foreign firms to own as much as 51 percent of their securities ventures, up from the previous 49 percent ceiling.

Other global investment banks, including Morgan Stanley, also seek a bigger controlling stake in its Chinese business under the new rules. Having spent years operating with limitations, where they were not authorized to surpass a 49 percent limit, banks signaled a desire to fully control their Chinese ventures in order to expand their mainland’s business.

Securities firms in China, which are mostly dominated by state-owned banks, generated more than $50 billion in revenue in 2017, official data shows.

Chinese President Xi Jinping said in 2018 that the nation would accelerate the opening up of its financial sector, including measures to facilitate foreign access to the Chinese insurance industry and easing restrictions for entry and expansion of foreign financial institutions.

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