Trump win casts fresh doubts over Wall Street’s China strategy

By Selena Li, Scott Murdoch and Kane Wu

HONG KONG/SYDNEY (Reuters) – More U.S. financial firms may pull back from China, hive off local units to minimise risks or pause expansion plans on concerns about geopolitical tensions in a Donald Trump 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 recorded double-digit economic growth.

However, those firms now face risks of even more trade tensions between Beijing and Washington under a new U.S. administration with their Chinese units already reeling from faltering economic growth and regulatory changes that have hit revenues.

Trump, who recaptured the White House with a sweeping victory on Wednesday, has proposed tariffs on Chinese imports in excess of 60% and ending China’s most-favoured-nation trading status.

There are also concerns about the measures he could take to make U.S. capital inflows into China and American financial firms working with some Chinese companies tougher, analysts said.

Singapore-based consulting firm Kapronasia’s research director Joe Jelinek said Trump would likely bring 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’s likely that American firms themselves would reconsider their China strategies to mitigate these risks,” Jelinek said, adding that could lead to a pullback or delayed investments.

A senior executive at a China-licenced entity of a large U.S. financial firm told Reuters that his firm had gone through a few rounds of “risk management meetings” at headquarters in months leading up to the election.

As a result of Trump’s return to the White House, the firm now focuses on making its China business a “self-sustained” independent operating unit, said the executive, declining to be named due to the sensitivity of the matter.

“It will be a very bumpy road ahead for U.S financial companies doing business in China with Trump returning to the White House,” said the executive. “‘De-Americanise’ has now become a guiding principle.”

STRATEGY RETHINK

Some Wall Street firms have already shrunk their Chinese footprints as a slowing economy and sharper regulatory scrutiny of corporate dealmaking and fundraising over the last couple of years dimmed the market’s revenue potential.

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