China is looking for foreign competition to sharpen the domestic financial industry/Bloomberg
Goldman Sachs Group plans to double its headcount in China over the next five years, provided the world’s second-biggest economy continues down the path of opening up its financial markets, reported Bloomberg.
The ambition to raise staffing to 600 is part of a five-year plan drawn up by executives at the New York-based investment bank.
Soon after he was elevated to the top job in 2018, Chief Executive Officer David Solomon asked for a detailed strategy for expanding in China over the next half-decade. Foreign banks are preparing to push into the world’s second-largest economy, vying to tend its growing wealth and compete for as much as $9 billion in commercial and investment banking profits.
China, meanwhile, is looking for fresh investments to cushion its economy and to attract foreign competition to sharpen the domestic financial industry.
President Xi Jinping has set plans to let foreign investment banks take full control of units in the country by the end of this year, part of an opening of its $45 trillion financial market that also includes asset management and insurance.
Goldman spent last year’s latter half honing its expansion plan. In behind-the-scenes talks, senior government officials signalled growing urgency to use capital markets, rather than the country’s banking system, to support corporate China as a trade dispute with the US weighed on the economy.
China unveiled its plan for opening up its financial market in late 2017, and in July 2019, the government decided to push forward its timetable by a year.
Todd Leland, co-President of Goldman’s Asia-Pacific operations outside of Japan, said, “The leadership in China understands the value of global capital flows, the government’s pledges provide a ‘robust framework’ to build a bigger business.”
Goldman’s profits reported from its joint venture are limited. In 2018, it made CNY 69 million ($10 million) from the unit in which it holds a minority stake.
Part of the bank’s expansion in China will be driven by ‘explosive’ growth in asset management, said Leland. Chinese households are sitting on about CNY 90 trillion ($13 trillion) in investable assets.
Clients increasingly want to diversify away from cash and real estate, as China is phasing out guaranteed wealth management products that have dominated its investment scene.
Goldman will also add to its investment banking, markets, private wealth and merchant banking operations on the mainland, betting an acceleration in capital market reforms will drive growth in equity and debt markets as well as mergers and acquisitions.
New York-based JPMorgan Chase & Co. is planning to expand its office space in China’s tallest skyscraper by a third. Zurich’s UBS Group has set its sights on doubling investment banking headcount in the next three to four years.
Similarly, Japan’s Nomura Holdings is initially building operation to serve wealthy Chinese clients onshore but will also expand investment banking as its boosts staff to 500 by 2023.