Uncertainty Looms Over US Financial Firms in China
As Donald Trump returns to the White House, US financial firms operating in China are bracing themselves for a tumultuous ride. Industry executives and analysts warn that Trump’s presidency may lead to a pullback or delay in investments, as firms seek to minimize risks amidst escalating geopolitical tensions.
A Lucrative Market No More?
In the decade leading up to the pandemic, mainland China was a golden opportunity for Wall Street investment banks and major US asset managers. The country’s double-digit economic growth made it an attractive market for expansion. However, with faltering economic growth and regulatory changes hitting revenues, US financial firms are now facing significant risks.
Tariffs and Capital Restrictions
Trump’s proposed tariffs on Chinese imports, exceeding 60%, and his plan to end China’s most-favored-nation trading status have raised concerns about the impact on US capital inflows into China. Analysts predict that Trump’s administration may impose stricter regulations on US financial firms working with certain Chinese companies, making it tougher for them to operate in the country.
Reassessing China Strategies
Singapore-based consulting firm Kapronasia’s research director, Joe Jelinek, believes that Trump’s presidency will bring a tougher stance on China, increasing regulatory risks for US financial firms. As a result, firms may need to reconsider their China strategies to mitigate these risks, potentially leading to a pullback or delayed investments.
A Bumpy Road Ahead
A senior executive at a China-licensed entity of a large US financial firm revealed that his company has been focusing on making its China business a self-sustained, independent operating unit. “It will be a very bumpy road ahead for US financial companies doing business in China with Trump returning to the White House,” the executive said.
Rethinking Expansion Plans
Some Wall Street firms have already scaled back their Chinese operations due to a slowing economy and increased regulatory scrutiny. According to Dealogic data, the top five US investment banks earned $454 million in Chinese investment bank revenue in 2024, down from the peak of $1.6 billion in 2020.
Law Firms Exit China
Over 10 US law firms have closed all or one of their China offices since last year, citing geopolitical tensions as a major concern. Law firms Mayer Brown and Dentons have also hived off their Hong Kong and mainland China teams, respectively.
Uncertainty Reigns
Christopher Beddor, deputy China research director at Gavekal Dragonomics, predicts that US financial firms’ immediate focus will be on Trump’s tariffs and Beijing’s response. “I think we’re in for the most uncertainty around US-China relations in years,” said Beddor.
A Silver Lining?
However, some Wall Street firms may still see opportunities in China, despite the uncertainty. A senior executive of a US financial firm’s China unit believes that Beijing’s continued push to give foreign firms more financial market access could be a silver lining. “You don’t stop going to work because you are afraid of car accidents. They do happen a lot, but we want to make sure we don’t overreact,” the general manager said.
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