Magazine article Global Finance

Global Banks Place Their Bets in China

Magazine article Global Finance

Global Banks Place Their Bets in China

Article excerpt

International financial institutions and regional investors are shelling out billions of dollars for stakes in China's largest banks. With a booming economy and an enticing $1.5 trillion in personal savings, China has become an attraction for global bankers ahead of the full opening of its financial system to foreign competition late next year.

While the Western bankers characterize their investments as strategic partnerships, most are demanding guarantees that they won't find any skeletons in the vaults of the Chinese institutions, which have disposed of mountains of non-performing loans.

Singapore's state investment agency, Temasek, which already has profitable bank investments in Indonesia, South Korea and India, is making some of the biggest bets on the future of China's banking industry. Temasek, which is headed by Ho Ching, the wife of Singapore Prime Minister Lee Hsien Loong, agreed on August 31 to acquire a 10% stake in Bank of China for $3.1 billion. Temasek also is expected to spend $2.5 billion for a 10% stake in China Construction Bank. Earlier this year, the Singapore agency purchased a 5% stake in Minsheng Banking, one of China's few privately owned banks.

Also in August, an investor group consisting of Royal Bank of Scotland, Merrill Lynch and Li Ka Shing Foundation agreed to acquire a 10% stake in Bank of China for $3.1 billion. Hong Kong-based billionaire Li Ka-shing is chairman of Cheung Kong and Hutchison Whampoa. Royal Bank of Scotland said it would invest $1.6 billion itself, giving it a stake of 5%, but that it would control the entire 10% stake on behalf of its co-investors. Fred Goodwin, CEO of the Edinburgh-based bank, says RBS received "appropriate warranties and protections" that would safeguard investors. "The deal that we have announced, from Royal Bank's perspective, is low risk," Goodwin said in a conference call. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.