The Chinese government plans to tighten rules on overseas M&A by domestic financial organizations in a move to promote a healthy and orderly development of overseas investment by Chinese financial organizations, the National Business Daily reported Tuesday.
Last year, Chinese financial institutions conducted a number of overseas acquisitions. However, most of these investments are currently suffering significant unrealized losses.
China Investment Corporation (CIC)'s holdings of Blackstone and Morgan Stanley stakes have dropped respectively 42 percent and 16 percent in value. China Development Bank's investment in Barclays Bank is suffering even higher losses of more than 50 percent. A similar situation applies to Ping An Insurance's investment in Fortis and Industrial, and to the purchase by Commercial Bank of China (ICBC) of a 20% stake in the Standard Bank of South Africa.
As a result, China's regulators have stepped in. The regulators have not yet approved any big overseas investment proposals by domestic financial institutions since the early part of this year.
In January, China Development Bank planned to invest US$5 billion in Citigroup as the anchor investor, but the deal was rejected by the Government. Last week the Bank, one of the three state-owned policy banks in China, received another rejection on its US$10 billion investment plan to buy Germany's Dresdner Bank from Allianz. Ping An Insurance's proposed purchase of 50% of Fortis' asset management business also failed to get regulators' approval.
According to the report, China's Ministry of Finance is drafting Regulations on overseas M&A by Domestic Financial Organizations, along with the People's Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission.
The draft will establish regulations on the principles and review process of offshore investment by domestic financial institutions.
For more details, please read the complete story in Chinese:
(http://epaper.nbd.com.cn/mrjjxw/20080909/index.htm)
(China.org.cn by Yan Pei, September 9, 2008)
