Chinese challenges

7 May 2010 By Wei Gu

Local press have seized on the Wall Street firm’s problems at home. That may not cost it mandates today, but could affect its future access to juicy deals. With Goldman mired in an $80 mln derivatives dispute, other clients may now be emboldened to tear up their contracts too.

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Goldman Sachs hired public relations firm Brunswick Group to handle its media relationships in China, after the U.S. Securities and Exchange Commission filed fraud charges against the firm.

The Wall Street firm was ranked third in China's equity capital league tables in 2009, underwriting proceeds of $7 billion, according to Thomson Reuters data. The bank has also been selected as an underwriter for China Agriculture Bank's initial public offering this year, which could raise as much as $30 billion, according to some reports.

Shenzhen Hepalink Pharmaceutical, a company in which Goldman had invested, floated in Shanghai on May 5. Goldman's 2007 investment of $4.9 million investment was worth $1.2 billion by the close of May 6, implying a return of roughly 250 times.

Goldman has an outstanding oil derivatives contract dispute with Shenzhen Nanshan Power, which refused to pay $80 million due to a subsidiary of the U.S. firm. Nanshan said in December that both sides reserved the rights to take the matter to court.

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