Goldman Sachs GS) recently announced plans to double its workforce in China over the next five years. The bank plans to hire 600 employees in the mainland as part of its new five-year plan to boost profitability and share price. The news was first reported by Bloomberg.
The bank has been undertaking efforts to expand in China. Along with mass hiring, the company will inject capital by buying new shares to be issued by its onshore entity. This is likely to result in dilution of the control of businessman Fang Fenglei, who initiated the plan of the joint venture (JV), Goldman Sachs Gao Hua Securities in 2014, with former CEO of Goldman Hank Paulson.
Moreover, Goldman intends to add to its advisory, markets and merchant banking operations in the mainland. Also, it has plans to apply for a license to run fully-owned asset management operations, following the inauguration of the market for the same by China in April.
Goldman is also thinking of expanding its footprint outside Beijing and Shanghai to Shenzhen. Further, the bank has been working closely with China’s authorities to train them about financial products like derivatives.
John Waldron, president of Goldman, said “The biggest opportunity in China is actually not in investment banking. The biggest opportunity in China is to be an asset manager for all the savings.”
However, any negative development in the U.S.-China trade war might dim the prospects of expansion.
China’s Efforts to Boost Financial Sector
Beijing’s continued efforts to open up China’s financial sector make the country an attractive option for foreign banks to expand operations there. Initiatives of China’s authorities include removal of shareholding limits on foreign ownership of securities, insurance and fund management companies.
Last August, Goldman had applied to China Securities Regulatory Commission to raise its stake to 51% from 33% in the JV. The company’s plan is contingent on receiving majority control and full ownership of the mentioned venture, the decision of which is likely to come in late 2020.
Earlier, China granted majority control to other foreign banks in the respective local ventures. Some are UBS Group AG UBS, which received a controlling stake in UBS Securities China in November 2018. Further, JPMorgan Chase JPM and Nomura Holdings Inc ADR NMR have received approval from China’s authorities to open majority-owned security brokerage ventures in the country.
Goldman’s move will allow it to benefit from easing regulations and tap the growing market of China. Also, the bank’s focus on diversifying its revenues is in sync with its efforts to expand presence in the country.
Shares of this Zacks Rank #3 (Hold) company have appreciated 36.3% over the past year, outperforming the industry’s rise of 13.4%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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