Goldman Sachs tapped into a $2.5 billion private equity “partnership fund” with the Chinese government to buy several American and British companies, according to a report.
In 2017, the Wall Street giant struck a deal with China Investment Corporation, the $1 trillion sovereign wealth fund that manages some of the country’s foreign exchange reserves.
Goldman’s then-CEO Lloyd Blankfein unveiled the China-US Industrial Cooperation Partnership Fund during a state visit to Beijing by then-President Donald Trump.
The bank touted the fund as an “anchor investor” that would help companies expand their presence in China.
Goldman used cash from the fund to buy seven companies, including LRQA, whose subsidiary, Nettitude, is a cyber security firm that provides services to the British government, according to Financial Times.
FT quoted a British government official as saying that authorities “will not hesitate to use our powers to protect national security where we identify concerns.”
A spokesperson for LQRA, which carries out inspection and certification services for the British military as well as energy and health care sectors, told FT: “China represents 40% of the global certification market and we are currently under-represented there, which is something we are seeking to address in part with assistance from the [Goldman-CIC] fund.”
The spokesperson added that Nettitude had no business in China and that there were no plans to set up there.
Goldman also used funds from the CIC to acquire Project44, a tech startup that tracks global supply chains; Cprime, a cloud-computing consultancy firm; Parexel, a drug-testing company; and Boyd Corporation, a manufacturer of AI and drone systems, according to FT.
At the time of the acquisitions, Goldman neglected to mention that the deals were partly financed from the Chinese fund.
The cooperation fund was set up expressly to help US companies penetrate the Chinese market. And the fund has touted CIC’s involvement as a strategic advantage in accomplishing this goal.
The use of Chinese state funds to acquire US- and other Western-based companies involved in sensitive sectors including technology and national security has drawn the attention of regulators.
The Biden administration is looking to crack down on American investors pouring money into Chinese firms due to national security concerns.
President Biden earlier this month issued an executive order restricting US investment in Chinese ventures involving artificial intelligence, quantum computing and semiconductors.
Chinese efforts to invest in US companies have been tripped up in recent years by Washington’s concerns that the Chinese were gaining control of sensitive technology or companies that played key roles in the economy.
“The cooperation fund is a US fund run by a US manager, and is managed to be in compliance with all laws and regulations,” a Goldman spokesperson told FT.
“It continues to invest in US and global companies, helping them increase their sales into the China market.”
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