Beyond the Middle Kingdom: Comparative Perspectives on China's Capitalist Transformation

VICTOR SHIH

In January 2006, the Ministry of Foreign Affairs (MOFA) in Beijing received a letter from former President George H. W. Bush. In the letter, Bush urged the Chinese government to approve an impending deal in which the Chinese government would sell 85-percent share ownership of a troubled Chinese bank to a consortium led by Citibank. In addition to praising Citibank and the other foreign member of the consortium, the Carlyle Group, Bush also intimated that a successful acquisition would be “beneficial to the comprehensive development of Sino–US relations.”¹ Undoubtedly, this letter quickly made its way to Zhongnanhai, where the Politburo Standing Committee discussed its content. The letter was then sent to the China Banking Regulatory Commission (CBRC), the bureaucratic entity formally charged with approving this deal, along with a set of instructions from the leadership. In March 2006, the content of the letter was leaked to the official press by the government. Instead of facilitating the deal, the leaked letter made it virtually impossible to approve the deal because it would appear that the Chinese government was caving in to foreign pressure. Soon afterward, the CBRC announced that the deal would not be approved as it stood because Citibank had asked for a higher share of the bank than was allowed under Chinese regulations at the time.² In the end, Citibank had to abandon the Carlyle Group as its partner and submit a much more modest bid to gain 20 percent control over Guangdong Development Bank, in line with existing regulations.

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