Goldman Sachs sees a good year ahead

Investment bank has been involved in big-ticket share offers including China mobile and Bank of China

When Mark Schwartz moved to Beijing four years ago with his family, he felt "privileged" to be working in the country.

The vice-chairman of Goldman Sachs Group Inc described his China posting as "coming home".

"We feel privileged to be living here," says Schwartz, 61, adding that he spends his weekends visiting historical sites such as the Temple of Heaven, the Summer Palace and the Palace Museum, also known as the Forbidden City.

Apart from his love affair with the country out of the office, he is also bullish about the business opportunities there.

"I believe 2015 will be one of the best years since the group started operations in China in 1994," says Schwartz, who is also chairman of the firm's Asia-Pacific division.

Even though the economy is slowing down, there are still major opportunities for a company the size of Goldman Sachs, a multinational investment bank based in New York's financial district.

"As a foreign financial institution, we compete for only about 2 percent of the Chinese financial services and products market, according to domestic laws and regulations," Schwartz says.

"But we do see growth in the business as the size of the economy and the opportunities here are increasing."

Back in 2004, Goldman Sachs set up a joint venture with Chinese company Beijing Gaohua Securities Ltd to provide financial services in the stock and bond markets.

The American powerhouse has also been involved in several major initial public offerings, including the big-ticket IPOs of China Mobile, PetroChina and Bank of China.

"They were a proud part of our group's history here," Schwartz, who understands the value of long-term relationships in Chinese culture, says.

That relationship will continue to prosper in the years ahead as the global economy gets back on track, he says.

"I have an optimistic view of the future.Growth in the United States is strong and resilient, and there is a likelihood that the US Federal Reserve will raise interest rates soon. The European economy has also stabilized."

Still, there are challenges ahead for the financial sector.

Last month, Goldman Sachs reported that third-quarter global net income fell to $1.43 billion, or $2.90 a share, from $2.24 billion, or $4.57 a share, compared with the same period in 2014.

Revenue worldwide also dropped 18 percent to $6.86 billion. Those figures were below analysts' estimates.

Choppy markets, fueled by investors' fears over economic growth, left its mark on a number of Goldman's businesses, from bond trading and stock underwriting, to the firm's own portfolio of long-term investments.

"We experienced lower levels of activity and declining asset prices during the quarter, reflecting renewed concerns about global economic growth," group CEO Lloyd Blankfein said in a company statement.

"But we continue to see strong levels of activity in investment banking and growth in investment management."

Despite the numbers, Schwartz is upbeat about the company's prospects, and China in particular.

"Development will continue to remain a significant part of global growth. I think fears about China's slowdown are overstated," he says. "I am confident and optimistic that China will continue to be the biggest contributor to global growth."

Another key element is Beijing's commitment to reforming and liberalizing the financial sector as well as pressing ahead with major restructuring in the country's industrial base. This will help create a stronger and more stable economy, producing sustainable growth, he says.

"While the entire opening-up process may take a long time, it will also lay the economic foundations for the next several decades," Schwartz says. "In my view, the rest of the world will benefit from a stronger China."

In light of this, Goldman Sachs has readjusted its development strategy to the government's latest economic initiatives and realities.

"Our business is growing here despite the market turmoil," he says. "We are one of the oldest foreign financial institutions operating in China.

"This year, Goldman Sachs will be one of the country's most successful joint ventures. We are excited and enthusiastic about our future, and we want to continue expanding our business here."

So, what are the vital ingredients of the company's success? Without hesitating, Schwartz sums it up in three words: people and culture.

For 146 years, the group has focused on attracting the brightest and the best, he says.

"We hope to keep our people for the long-term. Our value extends beyond business and commerce.

"One of the core values of Goldman Sachs is in philanthropy," he adds. "We want to contribute funds and expertise in all of the communities where we work around the world."

Apart from client focus and team work, diversity and inclusiveness are other core values at the group.

"We are very proud to operate as one of the most successful multicultural organizations anywhere in the world."

"We are an inclusive organization and we give everyone in the firm the same opportunities, regardless of nationality, ethnicity, religious background or sexual preference.

"In China, beside the above values, a long-term commitment to the country is the key for business success here," he adds.

Schwartz joined the investment banking division of Goldman Sachs in 1979. He then left the company in 2001 to become CEO of Soros Fund Management LLC before moving back to Goldman Sachs as vice-chairman in June 2012.

Looking to the future, he is convinced these are exciting times for the company and the country.

"We expect China to lower the market access threshold for foreign financial institutions so that we can compete on an equal footing with local financial companies," he says.

"As the size of the Chinese economy continues to grow, business opportunities will increase, which in turn will allow us to expand even with a limited share of the market."

Bio

Mark Schwartz, vice-chairman of Goldman Sachs Group Inc and chairman of Goldman Sachs Asia-Pacific

Age: 61

Nationality: American

Family: Married and lives with his wife, Lisa, in Beijing

Education: MBA, MPP and BA from Harvard University

Career

June 2012: Rejoined Goldman Sachs as vice-chairman

2001-2012: Chairman of MissionPoint Capital Partners, president and CEO of Soros Fund Management

1999-2001: Chairman of Goldman Sachs Asia

1997-1999: President of Goldman Sachs Japan

1991-1997: Head of the capital markets department of Goldman Sachs

1979: Joined Goldman Sachs in the investment banking division

chenjia1@chinadaily.com.cn

(China Daily European Weekly 11/06/2015 page20)