Amid a backdrop of escalating tensions between Beijing and the West, the renowned Wall Street institution, Goldman Sachs, deftly maneuvered Chinese state funds to acquire a selection of American and British businesses.
Intriguingly, this strategic move included the acquisition of a cybersecurity firm known for servicing the British government.
Subtle Power Moves: Unpacking Goldman Sachs’ Strategy
Goldman Sachs, over time, has finalized seven key deals utilizing the monetary resources from their private equity “partnership fund”. This $2.5bn fund was a 2017 collaboration with China’s sovereign wealth repository, the China Investment Corporation (CIC).
Those in the know suggest that among these acquisitions were companies specializing in global supply chain tracking, cloud computing consultancy, drug testing, and state-of-the-art systems integral for drones, AI, and electric vehicle batteries.
Despite acknowledging their investments in these companies, Goldman Sachs conveniently omitted the crucial detail: these investments were partly bankrolled by the China fund.
It’s evident that private equity funds like these are invaluable tools that sovereign wealth funds use to inconspicuously increase their stakes in pivotal sectors.
This strategy becomes increasingly important, especially as Western governments sharpen their gaze on foreign direct investments, chiefly those originating from China.
Diving into the past, one would find that the Goldman-CIC fund traces its origins to 2017. Then-chief executive of Goldman Sachs, Lloyd Blankfein, heralded the creation of the China-US Industrial Cooperation Partnership Fund.
This fund was envisioned as a tool to address the trade disparities between the two superpowers by channeling Chinese capital into US firms. Goldman Sachs had clearly mentioned that CIC would not just be a silent partner.
They would play a pivotal role in steering the growth trajectory of these acquired companies in the vast Chinese market.
The Tangled Web of Investments and Implications
The gears of this partnership fund didn’t halt, even with the relationship dynamics between Beijing and the West growing cold. In 2021 alone, four major investments were made.
A notable transaction was the acquisition of LRQA, the cyber and inspections arm of the UK’s Lloyd’s Register group. LRQA is a force to be reckoned with in various sectors like aerospace, defense, energy, and healthcare.
Their portfolio also boasts of Nettitude, a cybersecurity conglomerate that takes pride in “ethical hacking” and boasts of affiliations with the UK government.
It’s critical to note that while the financial contribution of the Chinese state in these deals might appear minimal at first glance, the long-term implications can’t be overlooked. CIC is not just another investor; its presence and influence run deeper.
Addressing the matter, an LRQA spokesperson mentioned their intent to leverage the Goldman-CIC fund to solidify their presence in China’s vast certification market. However, Nettitude, he confirmed, had zero ambitions or operations in China.
Goldman Sachs, in an effort to dispel concerns, stated, “The co-operation fund is a US fund overseen by a US manager… Its core purpose remains to bolster investments in US and global firms, thereby amplifying their market share in China.”
But where do the others stand? While the British government remains tight-lipped, hinting at their “quasi-judicial” investment scrutiny, they assure they wouldn’t shy away from using their powers to safeguard national interests.
From cloud computing advisories to retail tech groups, Goldman’s investments using the China fund are far-reaching. The very foundation of CIC in 2007 was to inject Chinese state capital into global ventures.
Fast-forward to today, and they boast a staggering $1.35tn in assets, with a significant chunk in alternative assets. The Goldman Sachs fund is just one of their many tentacles reaching into Western enterprises.