A delay in a government decision on a bid by Citigroup Inc for Guangdong Development Bank (
Citigroup executives have refused to comment on reports that a consortium led by the US banking giant has bid nearly US$3 billion for a majority stake in the struggling bank based in Guangdong.
A government decision on the deal originally had been expected before the Lunar New Year holidays in February, and then later possibly during Chinese President Hu Jintao's (
The state-run China Daily reported yesterday that China was unlikely to loosen controls that restrict foreigners to a maximum of 25 percent equity in Chinese banks, with investments by any one bank capped at 20 percent.
"The case of Guangdong Development Bank has been looked into many times by the China Banking Regulatory Commission and other related administrations, and it is hard to break the present restrictions on foreign strategic investor issues," the report cited a letter from the banking watchdog to the Guangdong City government, as saying.
Chinese regulators have been encouraging foreign banks to take strategic stakes in the industry, both as a source of funding and to upgrade local bank services with foreign managerial and technical expertise as the industry prepares for the opening of local financial markets to full foreign competition late this year.
Chinese leaders have stressed their insistence that the government retain controlling stakes in major state-run banks. Sales of billions of dollars in bank equity have also prompted a debate over whether foreign investors are paying enough.
"We are studying the issue," Jiang Dingzhi (
However, Jiang said there was no timetable for China to ease its limits on foreign investments. Any such changes are unlikely in the near term, he said.
Citigroup's bid for Guangdong Development Bank had fueled speculation that the authorities might relax that requirement for smaller banks.
State media reports said the Guangzhou-based bank might be allowed to sell off a larger share of its equity than usual because of its urgent need for capital and its large burden of bad loans.
Earlier reports said Citigroup was seeking a stake of between 40 percent to 45 percent in Guangdong Development Bank, with US private equity Carlyle Group taking a 10 percent stake.
The Citigroup consortium's bid also reportedly faces competition from other contenders.
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