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In an unprecedented foray into global financial markets, the Chinese State-owned bank, China Development Bank (CDB), announced it had bought a 3.1% share in Britain’s third largest lender, Barclays, with an option to increase this to 5% should the ABN Amro deal go through.
As well as the 2.2 billion euro investment, and a seat on the Barclays’ board of directors, CDB will receive support in its objective of becoming a full Chinese commercial bank including advice and expertise in risk management, corporate governance, IT and procurement. In return, Barclays would receive access to the Chinese market. CDB would also use Barclays Global Investors, the investment management subsidiary, as one of CDB’s preferred asset managers.
CDB is the largest of the three Chinese policy banks, i.e. set up and owned by the Chinese government to help state-owned companies do international and domestic business and does not currently have any domestic retail network. However they have a powerful corporate network across China. This is the first time that a Chinese investment organisation has taken a strategic investment in an international financial firm, although the Chinese State Investment Company took a passive $3 billion investment in Blackstone last May. Blackstone has also been the advisor on CDB’s investment in Barclays.
Barclays is currently involved in a battle for control of ABN Amro and CDB, in partnership with Temasek Holdings, the Singpaore Government’s investment vehicle, is prepared to invest a further $18.5 billion as support for completing the acquisition of ABN Amro, and, after enlisting this support, Barclays raised its bid to 67.5 billion euros.
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