An Industrial and Commercial Bank of China branch in Beijing.
Giulia Marchi/BloombergWall Street is rushing to secure leading positions in the fast-growing Chinese investment market.
China has granted initial approval for Goldman Sachs Group (ticker: GS) to take a controlling stake in a wealth management partnership with the Industrial & Commercial Bank of China (1398.Hong Kong).
The China Banking and Insurance Regulatory Commission will allow Goldman Sachs Asset Management to own 51% of the venture, with ICBC Wealth Management holding the rest, both companies said in public statements on Tuesday.
The collaboration marks the third wealth-management venture in China to give majority control to a foreign entity. France’s largest asset manager, Amundi (AMUN: France), began operations with Bank of China’s (3988.Hong Kong) wealth management subsidiary in September, with the former holding 50.1%.
Two weeks ago, money managing giant BlackRock (BLK) was granted approval for a 50.1% stake in a wealth-management business with China Construction Bank (939.Hong Kong) and Singapore’s state fund Temasek.
In March, JPMorgan Chase (JPM) purchased a minority stake in a China Merchants Bank (3968.Hong Kong) wealth-management unit.
The latest partnership will harness Goldman’s investment and risk-management expertise, alongside ICBC’s brand recognition in China and “unparalleled retail and institutional investor network,” Goldman said in an emailed statement to Barron’s.
Meanwhile, state-owned ICBC—the world’s largest commercial lender by assets, according to S&P Global Market Intelligence—said in a filing that its wealth management unit “serves as the core platform and flagship brand in the bank’s in-depth development of its mega asset management business.”
In a nod to Chinese regulators who are investigating some of the country’s biggest financial and technology companies out of concerns over economic instability and monopolistic practices, ICBC underscored that the tie-up will enhance “its comprehensive ability to serve the real economy.”
Goldman reached an agreement to acquire 100% control of its separate mainland Chinese securities joint venture in December, The Wall Street Journal reported. That would give it complete ownership of a partnership with Beijing Gao Hua Securities that began in 2004, though Goldman has had offices in China since 1994.
JPMorgan and BlackRock have each announced plans to gain complete ownership of their separate asset fund businesses in China.
According to Goldman Sachs Global Investment Research, the scale of Chinese households’ investable assets will reach about 450 trillion yuan ($70 trillion) by 2030, “of which about 60% is expected to be invested in non-deposit types such as securities, public funds, and wealth management products.”
“China’s wealth management industry has grown on the back of increased household wealth and continued financial market reform,” said Tuan Lam, head of the Client Business for Asia Pacific at Goldman Sachs Asset Management, according to Chinese state media.
In a January report, KPMG International noted several defining characteristics that set China’s asset management industry apart from others. “Retail distribution is critical, digital is how business gets done, regulatory developments can be rapid and difficult to predict, and in the battle of the mind-sets, trading dominates portfolio management,” it said.
ICBC’s Hong Kong-traded shares are up almost 1% this year. Goldman Sachs’ New York-traded shares have been on a bull run since November, hitting a 52-week high on May 10, though its stock price fell more than 1% after the ICBC announcement. The stock is up about 40% so far this year.
Tanner Brown covers China for Barron’s and MarketWatch.
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Wall Street Makes Big Moves to Cater to Wealthy Chinese Investors - Barron's
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