February 17, 2025
Uncertainty Looms
In December, top executives from Goldman Sachs, Morgan Stanley, and others met with U.S. Treasury officials to clarify new rules on Chinese companies flagged as national security threats. They left with more confusion than answers, as Trump’s ongoing tariffs and sanctions could lead to a financial shutdown similar to Russia’s.
The U.S. government’s crackdown on China-linked investments has left banks uncertain about what’s legal. Wall Street’s forecasted $45 billion exposure to China, with $9 billion in annual profits by 2030, is now shrinking.
Banks’ profits from China-related activities have dropped 20%, and major companies like Apple, Nvidia, and Microsoft earned just $33.7 million from China in 2024. JPMorgan’s China unit made only $26 million over five years, while Goldman Sachs earned $67 million, a tiny fraction of their global earnings.
Leadership Changes & Workforce Cuts
JPMorgan made several leadership changes in China in 2023, preparing for a worst-case scenario of a complete U.S.-China business ban. Morgan Stanley similarly reduced its Chinese operations, halting plans for a China brokerage and shifting focus to Hong Kong. Goldman Sachs reduced its workforce in China by 15%, and UBS halved its team since 2019.
Despite Wall Street’s pullback, Chinese stocks are rising, fueled by AI breakthroughs like DeepSeek. The MSCI China Index is expected to grow by 16%, with AI adoption boosting China’s earnings. Still, behind the optimism, bank executives are preparing for a scenario where China is off-limits due to Trump’s policies.
