Global investment banks are pushing ahead with ambitious expansion plans in Shanghai even as a strict lockdown in China’s financial capital forces them to make emergency food deliveries to some staff and leaves others camped out on trading floors.
The lockdown of Shanghai, running into its fourth week in some districts and part of Beijing’s policy of eliminating Covid-19 cases, is one of the biggest tests yet of western banks’ resolve to build businesses in a country in which domestic lenders have long dominated.
Goldman Sachs and JPMorgan Chase are among banks to have moved staff from Hong Kong to Shanghai in recent weeks. They are also part of a group, including Morgan Stanley, Citigroup, UBS, Credit Suisse and Deutsche Bank, to have earmarked Shanghai as a target for major investment in coming years.
“We’re trying to build a 50-year business in China,” said a person familiar with Goldman’s plans. “A disruption over several months isn’t enough to shift the strategic thinking.”
Wall Street banks have deepened their push into Shanghai in recent years, hiring hundreds of staff, as Beijing has continued to gradually open up China’s financial services industry and capital markets.
The government has laid out plans to make China’s most populated city a global financial hub by 2035 and transform Shanghai’s stock exchange into the world’s largest.
Nonetheless, China’s biggest lockdown since the pandemic began is proving disruptive to the largely local workforces employed by the banks. Just a handful of Goldman’s 200-person workforce in Shanghai are expats, according to a person close to the bank, a similar share to that of its western competitors.
With residents mainly confined to their homes, Goldman last week delivered food to its staff in Shanghai, which involved acquiring special licences to operate a vehicle in a city that is still largely locked down and home to 23mn people.
“We’re not Uber Eats, we’re an investment bank,” said one person familiar with matter, pointing to the complicated logistics involved. JPMorgan and Morgan Stanley have also delivered food and emergency provisions such as baby formula to staff at their homes.
“We’re trying to deliver food or other items of necessity to our employees,” said the head of Asia for one Wall Street bank. “We’re trying to help them as much as we can but there’s not much you can practically do.”
“It’s not pleasant for our people but they’re coping with it remarkably well, probably because being mainlanders they accept this with a degree of stoicism that maybe foreigners would find harder to accept,” they added.
The need to settle transactions means that some employees at Goldman and JPMorgan have remained camped in the office since Shanghai locked down its financial district on March 27. JPMorgan is examining how to rotate employees on and off its trading floor to keep it staffed, according to a person familiar with the matter.
Goldman and JPMorgan did not comment on their Shanghai offices.
There have been several initial public offerings on Shanghai’s stock exchange since the lockdown, with Chinese oil group Cnooc raising more than $4bn this week. The fact that the exchange has remained open has limited the disruption from the lockdown, the Asia head for the Wall Street bank added.
Citigroup said that a “huge digital transformation in corporate and commercial banking in China” meant its Shanghai business had not been significantly disrupted by the lockdown.
Still, some question whether this lockdown, coming on top of two years in which China’s zero-Covid policy has interrupted the ability for international groups with Chinese clients to do business in the country, could ultimately prompt western banks to rein in their ambitions.
“How can Goldman Sachs or anyone say with comfort we are going to put more money to work in China when we’ve not had senior managers [enter the country] or been able to meet people for two or three years?” said Fraser Howie, an independent China analyst and author. “It’s business as usual for now, but the strategy can’t remain unchanged.”
Investors’ concern at the threat of prolonged lockdowns has sent the CSI 300, the biggest index of Chinese stocks, down by almost a fifth this year.