Wall Street's China units post record profits on trading surge

The China securities units of Goldman Sachs, Morgan Stanley, and JPMorgan all posted record profits in 2024, according to the Financial Times. That matters because it runs counter to the consensus narrative that Western financial firms are being squeezed out of the world's second-largest economy. Foreign banks now hold fully owned subsidiaries in China after regulatory changes that began in 2020, and last year's trading volumes gave them room to run.

The timing is notable. These record results landed while Washington tightened export controls, expanded entity lists, and forced audits of Chinese firms listed in New York. Goldman and Morgan Stanley have been operating joint ventures in China since the 1990s, but the shift to wholly owned control only closed in the past four years. The revenue upside from proprietary trading desks, underwriting, and wealth management appears large enough to override the compliance and reputational cost of staying in-country.

Trading volume in mainland equities spiked in the second half of 2024, driven by policy stimulus and a sustained rally in the CSI 300. That liquidity surge directly benefits securities firms that clear, finance, and facilitate transactions. The FT notes that all three banks benefited from this environment, though it did not publish detailed revenue breakdowns. The absence of a similar boom in IPO issuance or M&A suggests the profit source is overwhelmingly secondary-market activity.

The European equity picture from Reuters offers a useful contrast. The STOXX 600 posted its best weekly gain in over a month, with the rally broadening beyond mega-cap tech into cyclicals and financials. That breadth is typically a sign of improving risk appetite, not a reach for growth at any price. If Chinese equities are also rallying on breadth rather than speculation, the tailwind for Western brokers has more quarters to run.

The question for stewards is whether this represents durable franchise value or a cyclical windfall. The last time foreign banks thought they had cracked China was 2007. What would have to be true for this cycle to end the same way? A sharp reversal in policy support, a freeze in cross-border capital flows, or a regulatory crackdown on foreign-controlled entities would each be sufficient. None is visible in filings yet, but all three have precedent.