Goldman, Morgan Stanley Receive Approvals for Majority Stakes in China Ventures

March 27, 2020Updated: March 27, 2020

Goldman Sachs and Morgan Stanley said on March 27 they had received the final regulatory approvals to take majority stakes in their China securities joint ventures.

The approvals come as policymakers and authorities step up efforts to shield the world’s second-largest economy, battered by the CCP virus pandemic.

The Epoch Times refers to the novel coronavirus, which causes the disease COVID-19, as the CCP virus because the Chinese Communist Party’s coverup and mismanagement allowed the virus to spread throughout China and create a global pandemic.

Goldman and Morgan Stanley received the nods from the China Securities Regulatory Commission to raise their stakes in Goldman Sachs Gao Hua Securities and Morgan Stanley Huaxin Securities from 33 percent to 51 percent and 49 percent to 51 percent, respectively, the two Wall Street banks said in separate statements.

view of the Goldman Sachs
A view of the Goldman Sachs stall on the floor of the New York Stock Exchange on July 16, 2013. (Brendan McDermid/Reuters)

Majority ownership of the joint ventures potentially allows the U.S. banks to expand operations in China, and better integrate them with their global businesses.

Goldman in 2004 set up its China securities JV with Beijing Gao Hua Securities, which was co-founded by veteran Chinese banker Fang Fenglei.

Unlike most of the other China JVs, Goldman already has day-to-day operational control of its JV, which offers investment banking services such as equities and bond underwriting and deal advice.

Despite that managerial control, Goldman has long made it clear it would eventually seek to take a majority stake too.

Shanghai-based Morgan Stanley Huaxin Securities was established in 2011 and its existing operations include underwriting and sponsoring equity and debt offerings as well as proprietary trading of bonds, it says on its website.

China raised the cap on foreign ownership of securities operations to 51 percent in 2018. Until then international banks had been allowed only minority stakes in their Chinese joint ventures.

Morgan Stanley building in Times Square
Morgan Stanley building in Times Square in New York on April 21, 2011. (Ramin Talaie/Getty Images)

Swiss lender UBS became the first foreign bank to hold a majority stake in a China securities business under the new rules in 2018. Japanese brokerage Nomura Holdings and JPMorgan got their approvals last year.

Credit Suisse is still awaiting approval after it submitted an application for majority-controlled securities JV.

Beijing promised to scrap foreign ownership caps on securities firms and mutual funds for foreign investors from April 1, in an interim Sino-U.S. trade deal signed in January.

The approvals for Goldman and Morgan Stanley come a day before China temporarily bars entry for most foreigners as an interim measure in response to the CCP virus epidemic.

Market participants said the thumbs up was a sign the country is continuing with the formal opening up of financial markets, despite the CCP virus.

Last Friday, Shanghai said some of the world’s top financial institutions, including BlackRock and JPMorgan, were stepping up investments in China’s financial hub, undeterred by the pandemic.

By Zhang Yan and Julie Zhu

Epoch Times staff contributed to this report.