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

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Good morning. 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 China.

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.

Goldman’s current approach towards China is “more conservative”, Solomon said. “We’ve probably pared back some of our financial resources there, simply because there’s more uncertainty.” Here’s more from Solomon’s wide-ranging interview with the FT.

• Quant traders bullish on China: Computer-driven hedge funds are betting that China’s financial markets offer plenty of opportunities to make money, despite an exodus of foreign investors, rising US-China tensions and growing scrutiny by regulators.

Here’s what else I’m watching today:

• Reports: The OECD publishes its latest Economic Outlook.

• Vietnam: The country’s parliament is set to approve a controversial new levy for multinationals as part of a global tax reform led by the OECD. (Reuters)

• Economic data: Germany releases inflation data including the preliminary consumer price index and the harmonised index of consumer prices.

Five more top stories

1. Hamas freed a fifth consecutive group of hostages, as a pause in the fighting held despite Israeli troops and militants briefly exchanging fire in northern Gaza. In return, Israel had agreed to release 30 Palestinians from its prisons. Earlier in the day, CIA director Bill Burns and the head of Israel’s Mossad spy agency David Barnea held talks in Qatar aimed at prolonging the temporary truce to secure more hostage releases.

• Exclusive: A top CIA official posted a pro-Palestine image on Facebook two weeks after Hamas attacked Israel, in a rare public political statement amid dissent over the White House’s handling of the Israel-Hamas war.

• US warns Israel: President Joe Biden and other senior US officials have warned Israel that its planned offensive in southern Gaza must avoid the kind of mass internal displacement triggered by its bombardment of the north.

2. Charlie Munger, the vice-chair of Berkshire Hathaway, died at the age of 99 yesterday morning at a California hospital, the US investment conglomerate announced. Follow this developing story here.

3. Finland will close all land borders with Russia after Helsinki accused Moscow of deliberately orchestrating a surge in asylum seekers as part of an “influence” operation. Tensions between the two countries have risen since Russia invaded Ukraine last year, prompting Finland to abandon decades of neutrality by joining Nato in April. Helsinki claims the rapid increase of migrants is a “hybrid warfare” tactic.

• Ukraine news: The wife of Ukraine’s military intelligence chief and several of the agency’s officers are undergoing medical treatment after being poisoned with heavy metals, Ukrainian officials have said.

4. The dollar hit a three-month low yesterday and US Treasury yields slid as investors grew increasingly confident that the US Federal Reserve will start cutting interest rates by mid-2024. The decline accelerated after Christopher Waller, one of the Fed’s most hawkish policymakers, signalled that interest rates were unlikely to rise further and could be cut if inflation continued to slow. 

5. Chinese fast-fashion group Shein has filed confidential paperwork for an initial public offering with the US securities regulator. The internet retailer has hired JPMorgan Chase, Morgan Stanley and Goldman Sachs to advise it on the IPO, in what is likely to be one of the largest US listings of the past decade.

Deep dive

A swath of unfinished apartment blocks across China, indebted buyers uncertain if they will ever move into their new homes and anger at the loss of their deposits — the impact of China’s real estate crisis has been immense. FT reporters spoke with individuals who invested in the Chinese property market and their stories illustrate the wide impact of the meltdown.

We’re also reading . . . 

• Life as a Hamas hostage: Families of former captives reveal experiences of seven weeks in captivity.

• The UAE’s $200bn bid for climate influence: The COP28 summit host is investing big in clean energy, but critics accuse it of greenwashing its role as one of the world’s largest producers of hydrocarbons.

• American vs European populism: The US variant is much more of a personality cult, writes Janan Ganesh. But in which half of the west is liberalism more vulnerable?

Chart of the day

Allies of China and countries that lean towards Beijing generate only 27 per cent of the world’s GDP, nearly all of that in China itself, compared with 67 per cent in the US bloc. That’s one reason why the US retains the economic advantage in its rivalry with China, as Martin Wolf argues in his latest column.

Take a break from the news

As Christmas nears and the panic over presents begins to set in, celebrity chef Matty Matheson (you’ll recognise him from the hit Hulu show The Bear) provides some guidance on what to gift food lovers.

Additional contributions from Gary Jones and Euan Healy