Explained: Why is Chinese state media targeting Goldman Sachs?

In an uncommon move, Chinese state media hit back at the international finance titan Goldman Sachs following a negative report on Chinese banking institutions. This reaction was prompted by a sell-off in numerous banking shares on the Hong Kong Stock Exchange, triggered by Goldman Sachs' bearish assessment. Analysts view this public rebuke as part of China's strategic initiatives to deter entrenched negative market sentiments from permeating its domestic financial sphere.

Goldman Sachs' downgrade

On July 7, Goldman Sachs announced a significant revision of its stance towards key Chinese lenders, moving the Agricultural Bank of China (AgBank), the Industrial and Commercial Bank of China (ICBC), and the Industrial Bank from favourable ratings to a less promising "Sell" category. This decision didn't go unnoticed. In fact, it led to a noticeable dip in the Hong Kong-listed shares of these banks, stirring additional concerns among investors.

Chinese media’s response

The Chinese state media, represented notably by the Securities Times, was swift to respond. Their immediate critique of Goldman Sachs' bearish outlook painted it as an overly pessimistic and somewhat misunderstood perspective on the fundamentals of China's banking sector. It was clear that the state media's primary concern was to safeguard the reputation of China's financial institutions in the face of global skepticism.

What is China’s case

In its efforts to reassure the market, the Securities Times underscored the steps taken by Chinese banks to reduce property loan risks. It also highlighted how local governments were actively addressing debt risks. The proactive stance from Chinese state media sought to reassure both domestic and international investors of the stability and resilience of Chinese financial institutions.

The silence of Goldman Sachs

Despite the significant backlash from China's state media, Goldman Sachs hasn't issued a response yet to the critique levied in the Securities Times' editorial. As of now, the conversation remains a one-sided affair.

China’s economic situation

All thisl occurs against a backdrop of a challenging economic environment in the country. China's economy, while still robust, is facing several headwinds. It's grappling with the repercussions of the COVID-19 pandemic, the pressure of an aging population, and the urgency of transitioning to a more sustainable growth model. The economy has to recover from the stringent zero-COVID policy that the President Xi Jinping had espoused. 

Despite having abandoned the zero-COVID policy, the country’s economic outlook is yet to improve due to issues like poor consumer spending, a faltering property market, poor exports, and high debt levels.The banking sector, a crucial pillar of any economy, is under close scrutiny as these broader changes unfold.