Wall Street stands to lose tens of billions of dollars in China from deteriorating relations between world’s two largest economies
- Five big US banks had a combined US$70.8 billion of exposure to China in 2019
- While their assets in the country are comparatively small, they have big expansion plans there that may come undone if financial services firms are dragged into the tit-for-tat between the two countries
Wall Street giants such as Goldman Sachs and JPMorgan Chase have tens of billions of dollars at stake in China as political tension risks derailing the nation’s opening of its US$45 trillion financial market.
Five big US banks had a combined US$70.8 billion of exposure to China in 2019, with JPMorgan alone ploughing US$19.2 billion into lending, trading and investing. That’s a 10 per cent increase from 2018.
Profits in China’s brokerage industry could hit US$47 billion by 2026, Goldman estimates, with foreign firms gunning for a considerable chunk. There are US$8 billion in estimated commercial banking profits as well as a projected US$30 trillion in overall assets to go after, also being pursued by fund giants such as Blackrock and Vanguard Group.
“If you’re an American financial institution and you have an approved plan to expand into China, you’re going to continue that plan to the extent that the US government allows you to because you see great future profits,” said James Stent, a former banker who’s spent more than a decade on the boards of two Chinese lenders. “A US-China Cold War is not good for your plans to build business in China.”
