According to a report, Goldman Sachs has drawn down a $2.5 billion private equity “partnership fund” with the Chinese government to buy several American and British companies.
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.
Lloyd Blankfein, then CEO of Goldman, unveiled the China-US Industrial Cooperation Partnership Fund during a state visit by then-President Donald Trump to Beijing.
The bank touted the fund as an “anchor investor” that would help companies expand their presence in China.
Goldman used the fund’s money to buy seven companies, including LRQA, whose subsidiary Nettitude is a cybersecurity company that provides services to the UK government. according to the Financial Times.
FT quoted a UK government official as saying the authorities “will not hesitate to use our powers to protect national security where we identify concerns.”
A spokesman for LQRA, which provides inspection and certification services for the UK military and the energy and health sectors, told FT: “China represents 40% of the global certification market and we’re currently under-represented there, which is somewhat. We’re trying, partially with the support of [Goldman-CIC] fund.”
The spokesman added that Nettitude has no business in China and has no plans to set up shop there.
Goldman also used CIC funds to acquire Project44, a tech startup tracking global supply chains; Cprime, a cloud computing consulting firm; Parexel, a drug testing company; and Boyd Corporation, a maker of AI and drone systems, according to FT.
At the time of the acquisitions, Goldman didn’t mention that the deals were partially funded by the Chinese fund.
The cooperation fund was set up specifically to help US companies enter the Chinese market. And the fund has touted CIC’s involvement as a strategic asset in achieving that goal.
The use of Chinese state money to take over US and other Western companies operating in sensitive sectors such as technology and national security has drawn the attention of regulators.
The Biden administration wants to crack down on American investors who are pouring money into Chinese companies for reasons of national security.
President Biden earlier this month issued an executive order restricting US investments in Chinese companies in artificial intelligence, quantum computing and semiconductors.
China’s efforts to invest in US companies have been thwarted in recent years by Washington’s concerns that the Chinese would gain control of sensitive technologies or companies that play key roles in the economy.
“The Cooperation Fund is a US fund managed by a US manager and will be managed in compliance with all laws and regulations,” a Goldman spokesman told FT.
“It continues to invest in US and global companies and help them increase their sales in the Chinese market.”