Goldman Sachs pares back ‘growth at all costs’ China strategy

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Goldman Sachs chief executive David Solomon warned that tensions between Washington and Beijing could take years to resolve and that the Wall Street bank had moved away from a “growth at all costs” strategy towards the world’s second-largest economy.  

Goldman, which has had an office in Hong Kong for 40 years and opened its first office in China in 1994, has cultivated deep corporate ties there and is one of the most closely followed US companies in the country.

Speaking with the Financial Times at the Global Banking Summit, Solomon said he was encouraged by recent dialogue between the US and Chinese governments but cautioned that the differences between the two sides were deep-rooted.

“I think this is something that’s going to take years to resolve because there are real differences,” Solomon added. “I think the best path to resolution is one for the US and China itself to talk actively.”

Solomon said five years ago, Goldman was executing a strategy that was more “growth at all costs in China”.

“Today it’s a more conservative approach [in China] and we’ve probably pared back some of our financial resources there, simply because there’s more uncertainty,” he added.

In a wide-ranging interview with the FT, Solomon said that despite the wave of job cuts across Wall Street, rivals were still trying to poach Goldman bankers. That dynamic affected the bank’s plans for its bonus pool this year, he said.

“The competition for top talent is still pretty intense. And so, that has an impact on how we make judgments,” said Solomon.

Last year’s bonus round was a source of discontent among staff at Goldman, raising the stakes as the bank starts pay talks this week. 

Bonuses across investment banks are tipped to drop as much as 25 per cent as dealmaking has slowed and stock market listings have dried up.

Goldman’s profits dropped more than 30 per cent during the first nine months of 2023 as it grappled with losses following its pullback from retail banking. Writedowns on its real estate investments and a slowdown in investment banking and trading have also weighed down on earnings. 

Wall Street banks have talked optimistically about a rebound in investment banking next year. But the struggles of recent high-profile initial public offerings for the likes of chipmaker Arm and delivery start-up Instacart have hurt confidence.

Solomon also addressed his decision last year to stop DJing at high-profile events, after his hobby attracted outsized attention.

“My daughter got married a month and a half ago, I DJed at her wedding. It’s still a hobby, it’s a passion,” he said. “But if my doing it publicly in any way is distracting to Goldman Sachs, my number one focus is Goldman Sachs.”