(by Sh. Nakata)

Goldman Sachs wants to open an investment bank in China after the plan was approved by Beijing’s top political authorities, according to FT.com.

If it will be the US investment bank to become the first foreign firm capable of arranging equity and bond deals in China.

A recent study by Credit Suisse First Boston predicted China’s stock markets could become the second or third-largest in the world by 2010 with a capitalisation of US$2,000bn compared with the current US$500bn.

Chinese officials said receiving political approval was a major boost but warned the China Securities Regulatory Commission, the financial watchdog, could take months to make a decision, and its approval was not a foregone conclusion.

Controlling a Chinese investment bank would give Goldman Sachs an advantage over most of its rivals, which had lobbied the Chinese authorities to oppose the venture for the past year. The other Wall Street firms had argued the proposed structure breached the spirit of rules that aim to limit foreign firms’ influence on domestic markets.

Some of Goldman Sachs’ competitors, including CSFB, Deutsche Bank, Merrill Lynch and UBS, could now be forced to try and set up similar joint ventures.

Over the past decade, Morgan Stanley has had an edge over its rivals thanks to a 34 per cent stake in the domestic investment firm China International Capital Corp, which is majority-owned by China Construction Bank, one of the "big four" state lenders. Unlike Morgan Stanley, Goldman Sachs looks set to have management control and will be able to use its name in the Chinese joint venture, likely to be called Goldman Sachs China.