World Stock Watch

Deutsche Bank’s China Ambitions Hit a Roadblock

Joint Venture Talks Collapse with Postal Savings Bank of China

Deutsche Bank’s plans to expand its asset management business in China have suffered a significant setback. Talks with Postal Savings Bank of China (PSBC) over a joint venture have collapsed due to disagreements over ownership stakes. This development is a blow to the German firm’s ambitions in the world’s second-largest economy.

A Five-Year Pursuit Comes to an End

Deutsche Bank’s asset management arm, DWS, has been pursuing a partnership with PSBC for nearly five years. The goal was to tap into China’s growing asset management market, which is expected to continue its upward trajectory. However, the negotiations have now reached an impasse.

Beijing’s Demands Prove a Sticking Point

According to sources familiar with the matter, Chinese authorities wanted Deutsche Bank to increase its stake in the joint venture to take a majority share. However, the German firm was unwilling to comply, leading to the collapse of the talks. It remains unclear why Deutsche Bank was hesitant to take a majority stake.

A Shift in Regulatory Landscape

In 2019, Beijing announced plans to allow global firms to form foreign majority-owned asset management joint ventures with Chinese banks. While the current rules do not specify whether a foreign investor must hold a majority stake, the shift in regulatory landscape has created uncertainty for Western financial institutions.

DWS Still Has a Footprint in China

Despite the setback, DWS still maintains a presence in China through its 30% stake in Harvest Fund. CEO Stefan Hoops has emphasized the importance of expanding in the Asia-Pacific region, and the company may need to explore alternative strategies to achieve its goals.

Western Institutions Face Challenges in China

Deutsche Bank is not alone in facing challenges in China. Other Western financial institutions, such as Fidelity International, Morgan Stanley, and Legal & General, have either cut jobs or shelved expansion plans due to concerns about the economy, limited dealmaking opportunities, and regulatory interference. As a result, the outlook for Western firms in China has become increasingly uncertain.