by WILLIAM PESEK
The 27-year bet Goldman Sachs has been running on China’s financial sector isn’t just paying off. It’s suddenly becoming a remarkably crowded trade.
True to its “long-term greedy” manta, the iconic Wall Street giant has had an office in Asia’s biggest economy since 1994. Since then, Goldman has eked out a modest living in the shadow of the giant state banks.
Now, “slow and steady” is suddenly accelerating as Beijing grants initial approval for Goldman to grab a controlling stake in a wealth management tie-up with state-owned Industrial & Commercial Bank of China.
Goldman isn’t alone.
A who’s-who of Wall Street royalty is rushing China’s way even as geopolitical currents pull Washington and Beijing apart. Last week, JP Morgan applied to take full control of its mainland securities venture. It also is supersizing hiring in China, by at least 17% this year.
The same with BlackRock Inc., which just got green-lit for a 50.1% wealth-management stake in China Construction Bank. And Vanguard has shifted its Asia headquarters from Tokyo to Shanghai.
And it is not just the Americans.
HSBC is closing its US retail banking business and accelerating its pivot to China. French asset manager Amundi is upping its presence via relationships with Bank of China. Schroders gained approval for a majority-owned partnership. Credit Suisse has detailed ambitious mainland hiring plans.
More?
Citigroup is applying to open a new wholly-owned domestic securities business in China. The list of household names that now own majority stakes in local ventures include Morgan Stanley, Nomura Holdings and UBS. Daiwa Securities is setting one up. Standard Chartered is working on expanding its mainland footprint, too.
Even though Donald Trump is gone, fallout from his trade war means US, European and Japanese financiers have rarely had more to lose as geopolitical tensions fester. Then there is the issue of whether the Chinese Communist Party will loosen controls further, thereby letting these players flourish in the local market.
Yet their actions prove that some of the world’s top bankers are willing to swallow these risks.
Show me the yuan
Consider this history’s biggest follow-the-money trade.
Analysts at Goldman reckon Chinese households will see investable assets surge to 450 trillion yuan, or $70 trillion, by 2030. That’s three and a half times bigger than the US gross domestic product (GDP).
It’s more than 14 times greater than Japan’s annual output – upwards of 60% of which, Goldman says, “is expected to be invested in non-deposit types such as securities, public funds and wealth-management products.”
As Tuan Lam, who heads the Asia-Pacific business at Goldman Sachs Asset Management, puts it, “China’s wealth management industry has grown on the back of increased household wealth and continued financial market reform.”
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