In this post:
- As transactions become riskier due to Trump’s economic policies and U.S. limitations, Wall Street banks are reducing their investments in China.
- Morgan Stanley, JPMorgan, and Goldman Sachs have closed offices, cut employees, and are even getting ready to completely leave China.
- Major banks are barely making millions while making billions abroad as a result of the drop of profits from China.
Because investing in China is riskier than ever due to President Donald Trump’s unclear economic intentions, Wall Street is pulling out of the nation. As US regulations tighten, banks that had invested billions in China are now reducing employees, closing branches, and getting ready for a potential complete withdrawal, according to a Bloomberg article.
Top executives from Morgan Stanley, Goldman Sachs, and other large corporations met with US Treasury officials in mid-December to discuss the most recent investment regulations that target Chinese firms that have been identified as national security threats. They left with more questions than answers.
China might see another financial shutdown similar to that of Russia if Trump keeps his repeated pledges to impose tariffs and sanctions since taking office.
Wall Street finds it difficult to travel to China because of the US.
Banks are rushing to determine what is still legal in the wake of the US government’s crackdown on investments tied to China. It was formerly estimated that Wall Street’s overall exposure to China will reach $45 billion by 2030, yielding about $9 billion in earnings annually. However, it is now evident that this prediction is failing.
According to the Bloomberg research, the four biggest international corporations (Apple, Nvidia, Microsoft, and Amazon) made just $33.7 million in China in 2024, while Wall Street’s total revenues from China-related activities, such as loans, trading, and investing, have decreased by 20%.
In contrast to JPMorgan’s $57 billion global earnings in 2024, the brokerage division in China generated only $26 million during a five-year period. A little better, Goldman Sachs made 490 million yuan ($67 million) in China from 2018 to 2023. But that’s a tiny 0.50% of its global $13 billion net income last year. It’s also barely above CEO David Solomon’s $39 million annual salary. And so in response, Wall Street companies are making drastic cuts their workforces.
In 2023, JPMorgan underwent significant leadership changes, appointing new co-country heads and removing important executives in its China division. Even worse, the bank is getting ready for a total US ban on doing business with China. Similar to how businesses reacted when sanctions were imposed on Russia, executives have secretly developed plans to move corporate data out of China.
Morgan Stanley reduced their expansion plans, resulting in the largest number of job cutbacks in China in recent memory. Instead of launching a full-fledged China brokerage, executives decided to operate out of Hong Kong for the majority of their business.
China’s headcount at Goldman Sachs has decreased by 15% since 2022, falling well short of the bank’s initial target of 600 workers. The mainland investment banking team at UBS China has been cut in half since 2019, leaving just 50 people.
Citigroup shut down its onshore consumer wealth division, while its attempt to launch a China securities unit has stalled. US regulators ordered the bank to fix its risk and data compliance issues before expanding in China.
Bank of America, meanwhile, is the only Wall Street giant without an onshore presence in China—and according to the report, it’s staying that way.
Wall Street is not buying China’s return, despite the surge in AI stocks
Chinese stocks are soaring as Wall Street pulls back. In anticipation of China’s remarkable AI breakthrough, DeepSeek, analysts at Goldman Sachs, Morgan Stanley, JPMorgan, and UBS have increased their targets for Chinese stocks.
The CSI 300 is now anticipated to reach 4,700, while the MSCI China Index is expected to increase by an additional 16%. According to Kinger Lau, chief China strategist at Goldman, the adoption of AI may boost China’s earnings-per-share by 2.5 percent annually over the next ten years.
In a note on Saturday, he stated, “DeepSeek and other AI models have changed the narrative of China technology, re-rated investors’ optimism about the growth of and economic benefits from AI.”
In the meantime, Man Group and Morgan Stanley are referring to Chinese stocks as one of the highest conviction trades of the year. Wall Street is optimistic on paper—but behind the scenes, banking executives are preparing for a scenario where China becomes completely off-limits due to Trump’s policies.
Some banks are actually reallocating resources to Japan and India, trying to fill the hole China leaves behind, according to the Bloomberg report, which also claims that Wall Street executives have admitted privately that no other country can replace China’s market size.
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