Wall Street abandons China investment plans over Trump-related economic uncertainties

Wall Street is abandoning China as uncertainty over president Donald Trump’s economic policies makes investing in the country more dangerous than ever. According to a Bloomberg report, banks that once poured billions into China are now cutting staff, shutting down units, and preparing for a possible full exit as US restrictions tighten.

In mid-December, top executives from Goldman Sachs, Morgan Stanley, and other major companies met with US Treasury officials to get clarity on the latest investment rules targeting Chinese companies flagged as national security threats. Instead of answers, they left with more confusion.

If Trump continues with his tariffs and sanctions as he has promised many times since he took office, China could become another Russia-style financial shutdown.

US makes it hard for Wall Street to go to China

The US government’s crackdown on China-linked investments has left banks scrambling to figure out what’s still legal. Wall Street’s total exposure to China was once predicted to hit $45 billion, generating almost $9 billion in annual profits by 2030, but clearly, now that forecast is collapsing.

Per the Bloomberg report, Wall Street’s combined profits from China-related businesses, including lending, trading, and investments, have dropped by 20%, and the four largest global companies (Apple, Nvidia, Microsoft, and Amazon) earned only $33.7 million in China in 2024.

At JPMorgan, China’s brokerage unit brought in only $26 million over five years—compared to the bank’s $57 billion global earnings in 2024. Goldman Sachs fared slightly better, making 490 million yuan ($67 million) in China from 2018 to 2023. But that’s a tiny 0.50% of its global $13 billion net income last year. It’s also barely above CEO David Solomon’s $39 million annual salary. And so in response, Wall Street companies are making drastic cuts their workforces.

JPMorgan made some serious leadership changes in 2023, replacing key executives in its China operations and installing new co-country heads. The bank is even preparing for a worst-case scenario—a complete US ban on business with China. Executives have quietly drafted plans to relocate corporate data out of China, similar to how companies responded when sanctions hit Russia.

At Morgan Stanley, China job cuts hit their highest level in years as the bank scaled back expansion plans. Executives scrapped their ambitions to launch a full-fledged China brokerage, choosing instead to run most of their operations from Hong Kong.

At Goldman Sachs, China’s workforce has shrunk by 15% since 2022, far below the bank’s original goal of 600 employees. At UBS, the investment banking team in mainland China has been cut in half since 2019, leaving just 50 people.

Citigroup shut down its onshore consumer wealth division, while its attempt to launch a China securities unit has stalled. US regulators ordered the bank to fix its risk and data compliance issues before expanding in China.

Bank of America, meanwhile, is the only Wall Street giant without an onshore presence in China—and according to the report, it’s staying that way.

AI stocks boom, but Wall Street isn’t buying China’s comeback

While Wall Street retreats, Chinese stocks are skyrocketing. Analysts at Goldman Sachs, Morgan Stanley, JPMorgan, and UBS have raised their targets for Chinese stocks, betting on DeepSeek, China’s sensational AI breakthrough.

The MSCI China Index is predicted to jump another 16%, with CSI 300 now expected to hit 4,700. AI adoption could increase China’s earnings-per-share by 2.5% per year for the next decade, according to Kinger Lau, Goldman’s chief China strategist.

“DeepSeek and other AI models have altered the narrative of China technology, re-rated investors’ optimism about the growth of and economic benefits from AI,” he wrote in a note on Saturday.

Meanwhile, Morgan Stanley and Man Group are calling Chinese stocks one of the highest conviction trades of the year. Wall Street is optimistic on paper—but behind the scenes, banking executives are preparing for a scenario where China becomes completely off-limits due to Trump’s policies.

Some banks are actually reallocating resources to Japan and India, trying to fill the hole China leaves behind, according to the Bloomberg report, which also claims that Wall Street executives have admitted privately that no other country can replace China’s market size.

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