Major Wall Street firms that decided to expand their asset management operations into China even as other companies fled are struggling to capitalize on the market, according to The Wall Street Journal.
BlackRock, a top U.S. investment company, is one of many American firms that are struggling to compete in the Chinese market, ranking only 145th out of almost 200 Chinese mutual funds, with other firms like Fidelity International and Neuberger Berman ranking even lower, according to the WSJ. Factors contributing to the firm’s woes are a lack of willingness from local companies to utilize American investment banks, a struggling Chinese economy and restrictions from both the U.S. and China. (RELATED: Blacklisted Chinese Tech Giant Building Shadow Network Of Factories To Evade US Sanctions)
BlackRock and many other investment banking firms are choosing to continue operations in China, even as many other companies pull out of the country following harsh COVID-19 restrictions and heightened tensions with the U.S. Several North American and European carmakers cut ties with manufacturing plants in the country, and Apple told its manufacturing partner Foxconn to start making products in Vietnam instead of China.
In 2020, China removed certain barriers for firms, including restrictions on U.S. asset managers selling mutual funds to individual Chinese investors and limits on foreign ownership in securities firms in China, according to the WSJ.
Goldman Sachs, Morgan Stanley and JP Morgan Chase all reported revenue drops in their Chinese investment banking operations last year, according to the WSJ. BlackRock initially raised $917 million for its fund in 2021, with the fund ultimately shrinking by 47% as of June 30.
US investment restrictions hurt Chinese start-ups
According to investors and analysts, new restrictions on U.S. investments in China’s high-tech industry will deliver a “major blow” to Chinese start-ups and worsen the economic ties between the two countries. pic.twitter.com/A75DwFoJlF
— Spotlight on China (@spotlightoncn) August 14, 2023
The Biden administration earlier in August banned investments in some Chinese companies for American private investment companies operating in the semiconductor, quantum computing and artificial intelligence sectors.
The Chinese real estate market is in crisis as top developers grapple with massive debts, with Evergrande Groupe going to U.S. bankruptcy court last Friday in order to restructure its $340 billion in debt so as not to default on foreign bondholders.
Securities regulators in China announced Friday that they would take measures to bolster its declining stock market by cutting trading costs, supporting share buybacks and encouraging long-term investment. The move was an attempt to boost investor confidence as the wider economy struggles.
BlackRock, Morgan Stanley and JP Morgan did not immediately respond to a request for comment from the Daily Caller News Foundation.
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