Goldman Sachs Becomes invested In Chinese Debt

( Goldman Sachs, the American multinational investment bank and financial services provider, has reportedly purchased some Chinese real estate debt. It comes as the Chinese real estate industry sits on the verge of collapse, as major companies, including China Evergrande Group, Sinic Holdings, and China Properties Group, say that they may default on billions of dollars of debt.

It’s an indication that United States investors believe that the market is overestimating the possibility of contagion risk, presenting opportunities for those who wish to make investments and capitalize on the debt.

Angus Bell, who sits on the Goldman Sachs portfolio management team, said that they have been adding a “modest amount of risk” to their portfolio in the form of high-yield bonds issued by Chinese property developers. Goldman Sachs has also reportedly been investing in the Chinese government’s own local currency bonds.

Speaking to Bloomberg, Bell said that the property sector has been a “key driver of Chinese growth” over the last 20 years and that it’s unlikely the Chinese government will allow a major impact on its economic growth that would come from the collapse of the industry.

In other words, American banks know that the Chinese Communist Party won’t allow the industries to collapse and will use its vast government power to protect the industry – making these investments less likely than you may think.

Bell added that fiscal and monetary policymakers in China would make sure there are the necessary liquidity conditions throughout the national economy as part of their measures to keep the country afloat following the COVID-19 pandemic.

Should American companies be allowed to invest in China? And should major banks be allowed to profit from Chinese successes?