U.S. Financial Firms' Hesitant Future in China

By Selena Li, Scott Murdoch and Kane Wu

HONG KONG/SYDNEY (Reuters) – More U.S. financial firms may pull back from China or pause expansion plans due to geopolitical tensions under a Trump presidency, industry executives and analysts said.

Mainland China was a lucrative market for Wall Street investment banks and major U.S. asset managers before the pandemic, as the world's second-largest economy experienced double-digit growth.

However, firms now face heightened risks of worsening trade tensions between Beijing and Washington, especially with Trump's proposed tariffs exceeding 60% on Chinese imports and the potential for stricter capital flow measures.

According to Joe Jelinek, research director at Kapronasia, if Trump adopts a tougher stance, it could lead to increased regulatory risks for U.S. firms operating in China. He suggested that American companies might rethink their China strategies to mitigate these risks, possibly delaying investments or pulling back altogether.

A senior executive from a major U.S. financial firm indicated that due to Trump's return to the White House, their focus would now be on creating a self-sustained operating unit in China.

Strategy Rethink

Several Wall Street firms have already reduced their presence in China. For instance, the top five U.S. investment banks recorded $454 million in investment banking revenue from China in 2024, considerably lower than the $1.6 billion peak in 2020.

Due to ongoing U.S.-China tensions, asset manager Van Eck abandoned plans for a Chinese operation, while Vanguard exited its joint venture. Over 10 U.S. law firms have closed or reduced their operations in China since last year.

Christopher Beddor from Gavekal Dragonomics opined that the immediate focus for U.S. financial firms would be on how to respond to Trump's tariffs and potential reactions from Beijing. He predicted significant uncertainty in U.S.-China relations ahead.

Meanwhile, some executives believe that despite these uncertainties, there may be opportunities for firms in China's push to grant more access to foreign entities, emphasizing the need to remain prudent without overreacting to potential risks.