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China bars Credit Suisse for working with Taiwan

China barred Credit Suisse First Boston from managing securities sales after it organized two overseas conferences in which senior Taiwan officials took part, the Asian Wall Street Journal reported yesterday, citing unidentified executives at the bank.

The investment-banking unit of Credit Suisse Group has been dropped from the underwriting team to work on a share sale by China United Telecommunications Corp (China Unicom, 中國聯通), China's second-largest mobile phone company, the newspaper reported.

That might also mean the bank may be banned from managing at least two other deals in China, the paper cited an executive as saying.

Credit Suisse arranged for 35 Taiwanese officials and businessmen -- including Minister of Finance Yen Ching-chang (顏慶章) and president of the Taiwan Stock Exchange, Ju Fu-chun (朱富春) -- to make presentations to European investors in London, Amsterdam, Frankfurt, Zurich and Paris between June 25 and July 2.

The Zurich-based investment bank also apparently attracted Beijing's attention in March when it invited Yen and Chen Po-chih (陳博志), chairman of the Cabinet-level Council for Economic Planning and Development, to speak at an investment conference in Hong Kong, the report said.

According to the report, Credit Suisse received a phone call from China Unicom that the investment bank was no longer invited to participate in the company's stock offering, a Credit Suisse executive said, adding that Unicom said the decision was made by Beijing's top political leaders.

"This is not about economics at all. This is entirely a political problem," the executive said. "Beijing's blood is boiling over this ... All of our deals are in jeopardy."

"This is the way that China usually tries to send messages," said Michael DeGolyer, director of the Hong Kong transition project, an academic study tracking Hong Kong's transition to Chinese sovereignty.

"It will select a prominent target, take rather drastic action against it, and use that to send a message to other folks."
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