International | Oct 29 2007
By Greg Peel
Chinese banks are flush with cash. This has a lot to do with recent blockbuster share floats, but also a lot to do with the fact the government, itself flush with cash, has spent billions on cleaning up the non-performing loans on bank balance sheets so that IPOs may proceed. Most of the NPLs would have been to state-run entities operating under the old communist model. While China is still a communist country, its financial sector is rapidly becoming perfectly capitalist.
So what to do with the money? Begin to take over the world – that’s what. Reuters reports the China banking Regulatory Commission is encouraging Chinese banks to go out and acquire in order to improve their global competitiveness. Clearly such encouragement has not fallen on deaf ears.
Last week China’s biggest lender, ICBC, bought 20% of South Africa’s Standard Bank for US$5.6 billion, which is the biggest foreign acquisition by a Chinese commercial bank to date. At the same time, China’s CITIC Securities invested US$1 billion in troubled US investment bank Bear Stearns.
In July, the China Development Bank paid E2.2 billion for an initial 3.1% stake in Britain’s Barclays Bank.
Meanwhile, China’s African odyssey continues.
Last year China’s president spent a good deal of time touring Africa, setting up mining deals with many (mostly despotic) African leaders. China gets the mine while the Africans in return receive employment, and other incentives including, for example, the construction of a local football stadium. One can only guess at what the president gets in each case.
Xinhua News Agency reports China has opened another copper mine in Zambia with an expected output of one million tonnes per year and an approximate life of 25 years. 1,500 local jobs will be created. The Zambian vice president suggested: “The significance of this is that it is a reflection of the tremendous support and brotherhood between China and Zambia. The Chinese people quickly moved into action to support our privatization program by participating in the bidding process,” he said. “The two countries have enjoyed longstanding friendship.”
Yeah right.
China has also spent a good deal of time providing support to Latin American mining operations, and has no qualms with dealing with some of America’s enemies in the East. America is not amused.
