By Selena Li, Scott Murdoch and Kane Wu
HONG KONG/SYDNEY (Reuters) – More U.S. financial firms may withdraw from China, divesting local units to minimize risks or suspending expansion plans due to concerns about geopolitical tensions during Donald Trump’s presidency, industry executives and analysts said.
Mainland China was a lucrative market for Wall Street investment banks and major U.S. asset managers to expand in the decade leading up to the pandemic as the world’s second-largest economy posted double-digit economic growth.
However, these companies now face the risk of even more trade tensions between Beijing and Washington under a new US administration, with their Chinese units already reeling from faltering economic growth and regulatory changes that have hit revenues.
Trump, who retook the White House in a landslide victory on Wednesday, has proposed tariffs on Chinese imports of more than 60%, ending China’s most-favoured-nation trade status.
There are also concerns about what measures he could take to clamp down on capital inflows from the U.S. to China and U.S. financial firms working with some Chinese companies, analysts said.
Research director Joe Jelinek of Singapore-based consultancy Kapronasia said Trump would likely take a tougher stance on China, increasing regulatory risks for U.S. financial firms operating there.
New or increased tariffs and capital restrictions could discourage Wall Street firms from expanding into China as they face heightened scrutiny and potential compliance issues, he said.
“Rather than Beijing closing its doors, it is likely that US companies themselves would reconsider their China strategies to mitigate these risks,” Jelinek said, adding that this could lead to a pullback or postponed investments.
A senior executive at a Chinese-licensed entity of a major U.S. financial company told Reuters that his company had gone through several rounds of “risk management meetings” at its headquarters in the months leading up to the election.
As a result of Trump’s return to the White House, the company is now focused on turning its China business into a “self-sustaining” independent operating entity, said the executive, who asked not to be named due to the sensitivity of the matter .
“It will be a very bumpy road for American financial companies doing business in China as Trump returns to the White House,” he said. “‘De-Americanize’ has now become a guiding principle.”
RETHINKING STRATEGY
Some Wall Street firms have already shrunk their Chinese footprints as a slowing economy and tighter regulatory scrutiny of corporate deals and fundraising have reduced the market’s revenue potential in recent years.
