More Fun With Foreign Funds

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After writing about China’s global spending spree the other day, a further deal was announced – this time investment by the People’s Bank of China (PBOC) in the UK’s listed energy group, BG. The telegraph reports:

    “The [People’s Bank of China’s] £125m purchase of 0.46pc of energy group BG generated a flurry of speculation, not only about its intentions towards the UK firm, but also over what it says about how China intends to invest its vast foreign currency reserves.

    Although the PBoC’s share-buying in BG is far smaller than the £6.6bn stake that the China Development Bank took in Barclays last week, it is no less intriguing.”

It is suggested that the stake may be increased (a takeover?), may be transferred to the new state investment vehicle (being referred to as the China Investment Corporation), and that further investments in energy – a strategic asset for the Chinese – may follow but that “considerations about the political sensitivity of such deals are likely to curb unfriendly takeover approaches”. The Chinese government has obviously learnt a lot from the CNOOC / Unocal experience, but while the UK government has so far been friendly to the incoming investment, there is already a lot of press about the risks of state funds (and not just the Chinese one) buying up the private sector. I suspect the UK approach will be more measured than the US one, but it will be an issue to watch.

On the subject of China’s spending of its ever-bigger foreign currency reserve (now US$1.33 trillion), there was other interesting news in the Telegraph about Barclays, the recent recipient of US$7 billion in investment from the China Development Bank, looking to enter the retail banking sector in China.

The inbound investment (and the ground-breaking approval for the bank to invest in New China trust and Investment) was quite a coup for Barclays which, unlike RBS, HSBC, Standard Chartered, and others, has not spent billions on investing into China.

The cost of early entry can be high but, even where there is a market leadership opportunity (of the sort AIG enjoyed as a test case in the insurance sector) created by policy barriers, the speed of policy and regulatory change means that later entrants may play by different, more flexible, rules.

Slow and steady trumped fast and furious in this case. Of course, many businesses (including those in less-regulated sectors) cannot afford to take a wait-and-see approach.

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One Response to “More Fun With Foreign Funds”

  1. Archive » Going Global…But Bringing Business Back| China Business Blog Says:

    […] ently 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 f […]

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