The Bank of China may have to delay a planned US$342 million investment in La Compagnie Financiere Edmond de Rothschild as China's banking regulator withholds approval, three people familiar with the matter said.
With a December 31 deadline approaching, the watchdog has yet to endorse the bank's application, the people said, declining to be identified as talks are private. China's third-largest bank may seek to complete the purchase of a 20-percent stake in the Paris-based asset manager in next year's first quarter, one person told Bloomberg News.
The impasse highlights a tougher stance by the Chinese government after investments in foreign financial firms including Morgan Stanley and Barclays Plc led to about US$13 billion in paper losses over the past year. China's six largest banks hold US$670 billion of cash between them, more than the combined market value of the world's seven biggest non-Chinese lenders.
"The thing stopping China is the fear that they're still catching a falling knife," said Paul Cavey, chief China economist at Macquarie Securities Ltd in Hong Kong.
Wang Zhaowen, a Beijing-based spokesman at BOC, said the lender is waiting for approval for the investment application it made in September. A La Compagnie Financiere Edmond de Rothschild spokesman in Paris declined to comment.
Compagnie Financiere Edmond de Rothschild, the French fund-management unit of privately held bank LCF Rothschild Group, and BOC will begin an asset-management and private-banking venture to sell Rothschild's financial products through the 10,800 branches of the Chinese lender, according to a September 18 statement on the investment.
Michel Cicurel, the chairman of the French firm, at the time said Compagnie Financiere Edmond de Rothschild "had no need for cash" as it struck the deal. The company managed €29.6 billion (US$38.8 billion) in assets at the end of 2007.
The latest overseas bank acquisition green-lighted was in September, when the regulator approved China Merchants Bank Co's buying of Hong Kong's Wing Lung Bank Ltd.
China is becoming more cautious after a number of investments overseas soured as the global credit crisis deepened, with financial firms globally taking US$982 billion in losses and writedowns since July 2007.
China Investment Corp paid US$5 billion last year for 9.9 percent of Morgan Stanley and invested US$3 billion in Blackstone.
(Shanghai Daily December 12, 2008)
