Soon after the departure last month of chief operating officer Joe Stevens and chief executive officer Bill Wicker from Goldman Sachs Gaohua in China, it is reported that Shawn Xu is now set to leave Goldman's China partner, Beijing Gaohua. Xu will leave at the end of November after 18 months at the firm.

Stevens left to join Standard CharteredÆs private equity division in Singapore, while Wicker has been rotated back to Goldman Sachs in the US. Like Stevens, Xu is leaving the firm for good.

Xu joined Gaohua in April 2005. He had previously worked at China International Capital Corporation (CICC) from 1999 to 2004, where he was MD and head of research. Prior to working at CICC, he was China economist at Merrill Lynch.

After leaving CICC, Xu was hired to head up the fledgling research team at Gaohua, itself just getting off the ground. ôGaohua needed a local guy to pull together a local team. And heÆs got a big name domestically,ö says one source.

Six months after joining, Xu was given the vice-chairman position in November 2005. Sources describe this role as a roving commission, promoting Goldman without any actual hands-on managerial responsibility. It is often a form of semi-retirement. XuÆs original research function was taken over by Singaporean Kelvin Koh in March this year. Koh originally worked in the oil and gas team based in Singapore.

Industry sources in China say that Xu, who has the reputation of building up CICCÆs research capacity almost single-handed during his time there, is reported to have clashed with Peter MacDonald, chief operating officer at Gaohua Beijing.

ôXu wanted power and the same autonomy as he had enjoyed at CICC. But he wasnÆt allowed much freedom when he joined Gaohua,ö says one source.

In China, senior leaders within an organisation tend to be unconstrained by rules, even when they exist. But the source says Goldman imposes a very strict and bureaucratic work style on its China operations.

So unlike the surprise departure of Goldman veteran Joe Stevens, XuÆs departure has long been expected. ôHe was not enjoying his time at Gaohua as vice-chairman and in fact was pretty much absent from the office most the time,ö says one industry source, who was surprised to bump into him recently in Beijing. ôI thought he had long since left,ö he admits.

MacDonald is known for having a firm grip over Gaohua and he enjoys a good reputation in the China investment banking industry, not least because he was once a lieutenant in the Royal Marines.

Sources say that the departure of Xu confirms the control of Goldman over its China operations, with MacDonald now uncontested leader of both the sales and trading operations, and the research department. MacDonald is theoretically second to Fang Fenglei, a man who has worked at all the China-related investment banks at some point, and who is chairman of the combined operations.

ôBut in fact, Goldman loaned the money to Fang Fenglei to set up Beijing Gaohua, and they have the option of buying the operation off him once the regulations allow, so actually Goldman is in the driving seat, ô says one source.

In contrast, sceptics believe that the Achilles heel of the GoldmanÆs set up in China is that it is too reliant on Fang Fenglei.

GoldmanÆs China research effort is based in Gaohua, currently 22 strong and soon to rise to 30. The analysts cover both A-shares (the China domestic market) and H-shares (Hong Kong-listed China stocks) and are based in Beijing. This is unlike most investment banks, where research is split between mainland China and Hong Kong, covering A-shares and H-shares separately. Gaohua research is distributed to the qualified foreign institutional investors (QFII) and domestic clients who use Beijing GaohuaÆs brokering services, as well as in Hong Kong. Reports are bilingual in English and Mandarin.

Well-known for his liking for academia, specialists believe that Xu will return to teaching and research at a Shanghai-based university.