By Jing Yang
China has cleared Goldman Sachs Group Inc. and Morgan Stanley to take majority control of their local securities businesses, taking a key step in opening up its financial markets to Wall Street.
The China Securities Regulatory Commission will allow the two banks to move to 51% ownership of their local joint ventures, Goldman Sachs Gao Hua Securities Co. and Morgan Stanley Huaxin Securities Co., the two U.S. institutions said on Friday. Both had initially lodged applications around August last year.
Goldman Sachs is injecting new capital to increase its stake in its joint venture from 33%. It said it would move as soon as possible to migrate some business units that operate under its local partner, Beijing Gao Hua Securities, into the joint venture. Morgan Stanley will increase its stake in its Shanghai-based venture from 49%.
American financial firms, including investment banks, money managers and credit-card firms, have been trying to pry open China's markets for decades, and restrictions on their activity have been a focal point in President Trump's trade war with China.
The governments of the world's two biggest economies reached a trade deal in January that included awarding U.S. financial institutions better access to the Chinese market.
China increased the shareholding cap on local securities joint ventures to 51% in 2018, and UBS Group AG of Switzerland subsequently became the first foreign bank permitted to take majority control. Beijing later said it would remove ownership caps completely and allow 100% holdings as of this April.
Goldman Sachs said it would now seek full ownership of its unit "at the earliest opportunity."
The approvals came just as China resurfaced from a nearly two-month nationwide lockdown to contain the spread of the new coronavirus. The U.S. and Chinese governments have traded barbs over the virus, but in the past day Mr. Trump and his counterpart, Xi Jinping, held a phone call, which the U.S. president described as a "very good conversation."
JPMorgan Chase & Co. in December received approval to set up a new 51%-owned securities joint venture in China.
Write to Jing Yang at Jing.Yang@wsj.com