Goldman Sachs was ready for victory in China. What happened?


For Goldman Sachs, oversight of all China’s joint ventures must be at the end of 30 years of service and a heavy ticket for the future.

“The only 100 holders with a land tenure represent China’s largest commitment,” said Wall Street Bank in a December 2020 commemoration, signed by chief David David, which meant “the ongoing Chinese corporate market transformation, continues to grow and grow.” The growing needs of customers are growing ”.

Ten months later, Goldman’s position in the country appears to be very secure. In June, the bank was the leading producer of the worst-selling commercials ever launched by China’s first company. In August, partner JPMorgan Chase moved Goldman to become the first western bank that agreed to have a Chinese security business. Meanwhile, access to financial banks has declined as Beijing impedes Chinese major companies.

For many years, Goldman cultivated relations in China. Former officials of Hank Paulson traveled to China in 1992 to meet Jiang Zemin a year before he became President and visited the country several times.

Hank Paulson, left, former Goldman chief executive and former US Treasurer general, meets Wang Qishan, deputy prime minister of China, Beijing in 2008 © Minoru Iwasaki-Pool / Getty Images

In the years to come, Goldman will be the first company on Wall Street to gain approval to set up a financial bank in China and win major IPO titles such as PetroChina in 2000 and Bank of China in 2006.

“Everything we do in China counts more than anywhere else in the world,” said a banker in Goldman, Asia. “You have to do things in a way that might seem constructive, in a way that would mean we love you.”

In 2000, Goldman dug a second for Guangdong’s governor, Wang Qishan, for $ 6bn in debt restructuring – the first foreign bank hired by China.

Four years later, Wang, who had recently been promoted by the Chinese Communist Party to the mayor of Beijing, agreed to a joint venture between Goldman and Gao Hua Securities, a company that could give Wall Street Bank a foothold in the country’s markets. In 2018, Wang was elected vice president of China.

By last year, Goldman’s political exchanges wisely put him at risk of rapid expansion as China opened up its financial market.

With foreign restrictions loosened, Goldman readily agreed to a deal to buy a partner in Gao Hua and accelerated plans to add 600 more workers.

Chinese bank funds

In addition to buying his security partner, Goldman has entered into a partnership with China’s largest company, ICBC, to agree to set up an asset management business.

“The fact that we were chosen to partner with ICBC instead of just being a major product.

However, the bank has a dilemma: it plans to go to China, as Beijing imposes regulations that have made a difference between the country’s largest companies and foreign investors.

Painful IPO

After Goldman won the Didi writing position, it was seen as another powerful example of connecting Chinese major companies with western economies.

However, in July, just two days later $ 4bn IPO, Beijing blamed Didi for seriously violating information security and preventing new customer signings, and wasting about 50% off the share price.

Bad blood coming out of the debacle may be a barrier for Goldman, but the biggest risk is that it hinders future business.

The seller is based on New York City's subsidiaries of June 2021
Beijing condemns mounting horse race Didi criminal breach violates two days

After Didi took over, new rules were announced forcing any company with more than 1m of its customers to submit their comments before being named abroad. In the meantime, US authorities have enacted new rules to monitor the IPOs of Chinese companies. In addition, government intervention prevented Goldman and his allies from making money.

At the same time, US economic sanctions on China and Biden’s unexpected regime are becoming increasingly difficult to follow. In Beijing, a wide range of segregation from education to video has cost $ 1tn in the stock markets of China’s largest companies.

The conflict between the top authorities is that Goldman’s executives are careful to speak openly about their Chinese business for fear of offending Washington or Beijing. Goldman declined to comment.

Midwesterner goes east

Traveling in this new world is the fall of Todd Leland, who was given the opportunity to travel to Asia-Pacific at the end of 2018, after almost 30 full years at Goldman in the US and Europe. Midwest-speaking, non-Mandarin-speaking Midwesterner, 61, has been in Hong Kong for a long time since taking office. The plan to settle in Shanghai was disrupted by the plague.

Until recently, Leland’s main task was to clean up after the 1MDB crisis, in which Goldman agreed to bribe officials to work for Malawi’s financial system and fail to raise red flags when large sums of money were exchanged at a bank account.

Major sanctions linked to the case – including $ 3.9bn – have tarnished the bank’s reputation in Malaysia and reduced the power of Goldman’s staff.

Najib Razak, the former Prime Minister of Malaysia, out of court in Kuala Lumpur in July 2020
Najib Razak, a former Malaysian Prime Minister, has been sentenced to 12 years in prison after being found guilty of corruption in a bribery linked to the 1MDB © Fazry Ismail / EPA

“The Asian business has been very surprised over the past five years and David Solomon wanted someone to dismantle the ship,” said a former Goldman bank dealer in Hong Kong. “After 1MDB, it became an amazing place. My departing senior manager was looking at the gains and losses and realized that we start each year. [a big deficit from legal costs]. ”

The 1MDB also urged Goldman to step up its efforts to monitor China’s security situation at a time when China’s foreign policy has made this possible.

A former Goldman banker in Hong Kong said: “After 1MDB, the mindset was traditional and from the risk and control, Goldman needed to completely control his Chinese business.”

Leland signed an agreement to end Goldman’s partnership with Gao Hua Securities and a more than 20-year relationship with Fang Fenglei, a well-known Chinese rain producer who runs the project.

Fang Fenglei photographed in Hong Kong in 2018
Fang Fenglei helped get some banking in China © Bobby Yip / Reuters

Fang, who did not respond to a request for comment, brought some of the biggest things to the bank in China, such as the China China IPO known in 1997, but the relationship remained low, according to several people close to the bank. Divorce forces him to keep Gao Hua Securities business while Goldman continues to advance.

The deal was still pending approval, however, management was unhappy when a colleague JPMorgan was allowed to have his business on the ground – even though he spent seven months away from Goldman.

The project has also raised concerns about Beijing’s data. In a review of Goldman’s 100% ownership application last year, regulators tried to prevent the business from sending memos to foreign offices, according to a source close to the matter.

“We have said we cannot do business in this way,” said a source close to the matter. “This represents the magnitude of the anxiety. We did not ask these questions three years ago.”

A chart showing that money in China's Goldman bank is growing steadily

Culture is amazing

Leland hired a number of foreign projects to build a new savings team, including the demolition of Wei Cai from the independent business company FountainVest to run it together, the first time the bank hired a Chinese counterpart from outside the company.

Recruitment means that one-third of their group in the Chinese bank is now new, according to people familiar with the matter. “This is about Goldman, which has disrupted our culture,” said a second banker at Goldman.

Another outsider, Kevin Sneader, a former McKinsey management manager, has come to run the next round with Leland – the first non-banker to take over the role and is expected to be offered a job restoring the Goldman customer base in Asia.

Caring for those customers was not always easy. Goldman bought the property from Jack Ma’s Alibaba in early 1999, and one of the former bankers, Michael Evans, became President of the technical team in 2015. However, Goldman did not play a major role in the $ 37bn IPO of Alibaba Support Services.

While what was supposed to be the largest list in the world was closed at the last minute by Beijing, Goldman’s presence seemed daunting.

“People became very upset because they did not participate and pretended to be intentional,” said a former colleague. “Before the IPO was assassinated they would have cut off their fingers to make a deal.”

A source close to the bank said Nyerere forbade the writers to use their rivals and said most of the money Goldman made came from Alibaba’s rivals, such as Tencent, because of their coldness with Ma’s party.

But the big picture is not that Goldman evaded a failed IPO but that Beijing shut down.

If Goldman continues to grow in China, which continues to open its borders to capital, its revenue will be huge. Xi Jinping has shown, however, that he is ready to deal with destructive and extremist attacks in China.

“If global businesses do not want to stay in China, then our intention to stay in China is in doubt,” said one Goldman official. “But China’s history is full of low profile. You have to be prepared for some serious problems. ”



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