GOLDMAN SACHS Group, Inc. is inching closer to becoming the first Wall Street bank with 100% ownership of its securities joint venture (JV) 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.
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 Goldman Sachs Gao Hua, which will be renamed Goldman Sachs (China) Securities Co. Ltd.
Gaining full ownership and moving its non-investment banking businesses to the existing joint venture on the mainland will help Goldman untangle a convoluted structure.
In 2004, Goldman was granted approval to create a securities venture with Gao Hua Securities, which was set up by Chinese banker Fang Fenglei with a loan from the US firm. Goldman has been effectively controlling the operations of Gao Hua even though the loan was repaid a decade later. — Bloomberg
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