Banking on (Foreign) Banks

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The go global push has created a lot of controversy in relation to resources in the past, but more recently the focus has been on the impact of China’s investment into financial services firms (a flow of money that has traditionally gone the other way).

Further to reports on Chinese stakes in Blackstone and Barclay’s, reports also now indicate that Bear Stearns and UCBH in the US, and Standard Bank in South Africa, are also to get some Chinese shareholders.

    (AFP) “The Industrial and Commercial Bank of China said Thursday it would pay 5.5 billion dollars for 20 percent in South Africa’s Standard Bank, in the largest Chinese acquisition in the financial field ever.
    …China’s CITIC Securities and Wall Street icon Bear Stearns announced a strategic alliance earlier this week. The deal involves investments of at least two billion dollars.

    Earlier this month, China Minsheng Bank said it planned to buy 9.9 percent of UCBH Holdings Inc. for up to 317 million dollars in the first strategic investment by a Chinese lender in a US bank.

    …ICBC itself is one of the most expansion-minded Chinese lenders, saying in August it would take an 80 percent stake in Macau’s Seng Heng Bank for 583 million dollars.”

While these investments are not directly linked to the actions of the China Investment Corporation, the state investment vehicle, they do seem to be following a common strategy to acquire overseas assets, to internationalize, and to increase influence abroad. As the appointment of the most senior bankers in China is still political, and as there is plenty of scrutiny of overseas investments, it is fair to assume that these moves are supported by Beijing. Whether they are supported by governments (and other stakeholders) in the recipient countries remains to be seen. But so far the moves seem to have been made with some sensitivity – and, given the current credit crunch, some pundits may think it ironic that it is the Chinese banks who seem to have cash to spend, while it is their international counterparts who are suffering billions of dollars in write-downs. How times change.

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