Going Global…But Bringing Business Back

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Barclays was a bit of a dark horse in China until recently when, suddenly it was the recipient of the mainland’s “go global” largesse and received US$7 billion in investment from China Development Bank. But it seems the benefits go further than that, it has now been announced (as reported in the FT) that Barclays Capital will have:

    “a strategic commodities alliance with China Development Bank to provide Chinese companies with risk management in the energy, base metals and emissions sectors…Investment banks are rushing to tap this emerging market…The agreement with CDB might provide Barclays with some advantage against its competitors.”

Interestingly, China Development Bank is reported by MarketWatch to have been advised by Blackstone, also the recipient of an unexpected recent investment from China.

So the appearance of a major Chinese shareholder has helped both Blackstone and Barclays win more business in China. Blackstone is also on the hunt for investments, including a possible stake in Anhui Jinahhuai Auto and, for US$600 million, a 20 percent share in the chemical maker China National BlueStar (Group).

Meanwhile Goldman Sachs has been having a hard time. Having already been pushed back on the appointment of a chief representative in China (for not speaking good enough Mandarin), it has also recently lost its key rainmaker. Not only that, the FT also notes:

    “Goldman Sachs is to cede control of the consortium that owns China’s largest meat processor, just weeks after it secured final approval for the takeover.

    The unexpected move will raise eyebrows among dealmakers in China, who are sensitive to signs that Beijing is restricting foreign ownership of high-profile domestic assets.

    The US bank’s principal investment arm last year teamed up with CDH Investments, an overseas-registered Chinese private equity firm, to set up a takeover vehicle called Rotary Vortex, in which Goldman holds a 51 per cent stake.

    Rotary Vortex acquired full control of Shineway Group, owner of the meat processor, from state-backed interests this summer following a year of intense regulatory scrutiny.

    …The lack of transparency surrounding the move will fuel speculation that Goldman has fallen victim to a domestic backlash against the high-profile US bank owning a Chinese asset.

    In August this year, Chinese regulators blocked an investment arm of Goldman from acquiring a 10.7 per cent in Midea Group, a domestic appliance maker, without giving a reason.”

One would be forgiven for thinking that not having a well-connected local leader (such as Blackstone has and Goldman Sachs had), or lacking a well-invested government stakeholder (like Barclays and Blackstone enjoy) is becoming a bit of a barrier for the big banks and private equity houses.

But, on the bright side, at least Goldman can still look contentedly at their billions of dollars in (paper) profit on their investment in the Industrial & Commercial Bank of China (ICBC). However – in the long term – investment that flows the other way might be where some of the the best returns can be found.

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4 Responses to “Going Global…But Bringing Business Back”

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