Investments

China Regulator Gives Nod To Goldman JV’s

Goldman, Morgan Can Take Majority In China JVs

The China Securities Regulatory Commission has given final regulatory approval to Goldman Sachs and Morgan Stanley to assume majority stakes in joint securities ventures in the country, according to a report by Reuters.

Beijing has been increasingly opening its borders to outside businesses. The approvals arrive as the country is trying to protect its economy during the coronavirus crisis.

Goldman has raised its stakes in Goldman Sachs Gao Hua Securities from 33 percent to 51 percent, while Morgan Stanley has boosted its ownership in Morgan Stanley Huaxin Securities from 49 percent to 51 percent. Having a majority stake of the ventures will enable the banks to increase its presence in China and achieve better alignment with their other global businesses.

In 2004, Goldman created its joint venture with Beijing Gao Hua Securities. Unlike other China joint ventures, Goldman has maintained hands-on control over the day-to-day functions. The venture offers deal advice, bond underwriting and equities in its services lineup.

Morgan Stanley Huaxin Securities, which was started in 2011, offers such services as underwriting, bonds trading, debt offerings and sponsoring equity.

In 2018, China upped the cap on foreigners owning a securities operation to 51 percent. Before that, foreign banks were only allowed minority stakes.

The first bank to have a majority stake in a Chinese securities operation after the new rules were passed was Swiss lender UBS. JPMorgan and Japan’s Nomura Holdings were approved last year. Credit Suisse’s application is still pending.

The Goldman and Morgan Stanley approvals come at a strange time for China, as the country is temporarily prohibiting foreigners from entering over fears of exacerbating the spread of the coronavirus. However, the approvals are widely seen as a sign that the country is continuing to move forward by opening up its financial markets for growth.

JPMorgan and BlackRock are both continuing their investments in the country, despite the ongoing health crisis.

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