“Breakingviews: Goldman still on wrong side of China’s great wall”
August 21, 2012
John Foley quesitons whether Goldman Sachs‘ new leadership in China, coupled with a greater focus on offshore listings and cross-border mergers, will be enough to keep the firm’s business growing in China.
Maybe not, if that’s the full scope of the company’s prospects. I’m no particular fan of Goldman, but I suspect they are also looking to expand in two other business areas: listings of foreign companies in Chinese markets, and financing the stock buybacks that will help Chinese companies listed in the US to repatriate their equity.
Those are certainly growth areas, and Goldman is well positioned to capture a lot of that business. What is unclear is the degree to which such deals would face regulatory challenges. Both of these new business areas would have regulatory ramifications in China, if for no other reason than Chinese officials are uncomfortable with foreign companies in novel business lines.
Foley’s core point – that the company needs a regulatory point person, is thus at least half correct. Where practiced best, government relations is no longer a discrete function within companies in China. Rather, it is something that has to be a core competency of management at every level of the firm.
The challenge for Goldman’s new China leads, Mark Schwartz and Matthew Westerman, then, will be to address regulatory challenges proactively while trying to build deal flow. In this market, and at this point in China’s development, that’s a big ask. We’ll soon find out if Goldman sent the right team.
- What Goldman Sachs Employees are being Told about China (economicpolicyjournal.com)
- Chinese acquisitions in U.S. near record (edition.cnn.com)
- China Loading Up with US Assets (DVN, SNP, NXY, CEO, CHK, CS, GS, C) (dailyfinance.com)