Two More U.S. Banks Approved to Take Control of Chinese JVs

Morgan Stanley and Goldman Sachs Group Inc. received regulatory approvals Friday to take control of their Chinese securities joint ventures as China further opens up its financial services sector.

The approvals bring to five the number of foreign financial companies cleared to hold 51% stakes in existing or newly established Chinese joint ventures. China pledged to scrap all foreign investment caps in the securities, fund management and futures industries no later than April 1.

UBS Group AG, JPMorgan Chase & Co. and Nomura Holdings Inc. have already taken majority control of local joint ventures.

The China Securities Regulatory Commission (CSRC) approved Morgan Stanley’s application Tuesday to raise its stake in Morgan Stanley Huaxin Securities, a joint venture with Huaxin Securities, to 51% from 49%.

The regulator approved Goldman Sachs’s bid Monday to raise its stake in Goldman Sachs Gao Hua Securities Co., a joint venture with Gaohua Securities, from 33% to 51%.

“This is a significant milestone in the evolution of our business in China,” said Todd Leland, co-president of Goldman Sachs in Asia Pacific ex-Japan. “We will be seeking to move towards 100 percent ownership at the earliest opportunity.”

Goldman Sachs said in January that it plans to double its workforce in China in the next five years.

Other enterprises seeking approval to control securities ventures include Swiss conglomerate Credit Suisse Group AG and Daiwa Securities Group Inc., Japan’s second-largest brokerage by assets.

Credit Suisse filed its application even earlier than Morgan Stanley in July 2019 and received feedback from the CSRC in December. But there has since been no progress. Credit Suisse currently holds a 33% stake in Credit Suisse Founder Securities Ltd., a joint venture with Founder Securities Co. Ltd.

Bloomberg reported in January that JPMorgan is seeking to take 100% ownership of its China-based fund management joint venture. JPMorgan Asset Management, the New York-based bank’s asset management division, last year offered to pay at least 241.3 million yuan ($34 million) to its China partner Shanghai International Trust Co. to increase its stake in the venture from 49% to 51%. That transaction is yet to be approved by regulators.

Goldman Sachs is also talking with the wealth management unit of Industrial and Commercial Bank of China (ICBC) to set up a new wealth-management joint venture in which the American giant is seeking 51% ownership, a person close to the matter told Caixin in January.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)