China shops in UK
It is a deal that tells you most of what you need to know about the modern financial world.
First, it confirms that the Chinese state is using its enormous financial muscle to acquire assets and knowhow abroad. A strategic stake will be taken by the in , and its shareholding will be even bigger if Barclays succeeds in buying its huge .
Second, the deal shows the enthusiasm bordering on desperation of western institutions to tap into the huge Chinese market.
Barclays hopes its new relationship with the China Development Bank will yield it hundreds of millions of pounds in extra profits from doing new business in the enormous Chinese economy.
Also, it underlines the massive financial clout of the government investment arms of cash-rich trading economies like Singapore - since Singapore's is also taking a significant stake in Barclays.
And, of course, it proves once again that takeover battles are the most competitive sport around - since Barclays hopes that its new Asian financial firepower will help it carry off ABN and trounce the rival offer from a consortium led by .
It's all high testosterone stuff.
But when the initial excitement has died down, there will be some politicians and business people who will wonder whether when China buys abroad on this scale, the balance of economic power may be shifting eastward in a way that should concern us.
UPDATE 09:00: There are likely to be two particularly fruitful areas of mutual co-operation between Barclays and the China Development Bank.
One is business in Africa, where Barclays is a leading financial institution and where Chinese interests are buying up anything and everything.
The other is in commodities: China’s appetite for commodities remains one of the most powerful economic forces in the world and Barclays Capital has a growing commodities trading business.
What’s unclear to me is whether the CDB deal provides an answer to the question of what Barclays does if – in the end – Royal Bank’s consortium walks off with ABN, or whether the blow to Barclays’ reputation would be even greater if it loses.
On the one hand, CDB and Temasek are making a significant investment in Barclays, irrespective of whether it wins ABN.
However, they would commit vastly more to a merged Barclays and ABN – which underlines the importance of that deal to Barclays’ own view of what it needs to do to secure its long-term prosperity.
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Why should the balance of economic power be a concern. China was always the no 1 economy in the world for hundreds of years.
Funny how China is on the verge of a massive spending spree and then will use this to influence the world and Russia has started using it's massive energy resources to influence other states.
Should we be worried, yes as in 5 years time we won't have any real "power" left.
Maybe the politicians will wake up to this.
North sea oil was frittered away very poorly....
Ironic really. Globalisation which in part has been forced on companies by the City as a means of improving costs/profitability etc is largely what's been making China rich.
Providing cheap imports is also in what has driven up household debt levels to record levels.
Now - a bank that wouldn't support UK industry is having to take investment from a country with a lousy human rights record, poverty etc etc.
Somehow this all seems highly "iffy" and I actually think that as is now happening in the USA the politicians need to look a hard long look at this.
Personally the idea that the Chinese Govt would have a stake in a major UK financial institution does not appeal at all. Strategically it is not at all sensible.
It is perhaps not the trendy thing to say, but all this Chinese emphasis will end in tears.
Unlike India, which produces for profit, Chinese producers produce and price for sales. in the short term that does generate huge piles of cash, but then it starts washing about - buying vast USD assets has not been the brightest move (the Dow may be at a record 14,000, but in UKP terms, that is about 10,000 on exchange rates of three years ago). The yuan peg to the USD may be lossening, but it has still dragge dhe currency down, which in a more sophisticated economy would set fire to inflation. China cannot unwind its North American Peso assets or unhook its currency without causing huge instability in the world economy, which will damage itself most of all.
The pile of cash has now made its way to Barclays - who mysteriously were saying that their previous bid for ABN was what it is worth to them. So, if they pay more, the returns will be less. This is just overpricing assets. Barclays itself has just blundered badly over the Bear Sterns hedge funds by overvaluing assets, which will probably now be written off.
In China itself, workers and consumers are expecting a rapidly rising standard of living, while at the same time, the spare cash pile is partly going into what will prove to be bad loans. While China is undoubtedly rising and will be a major power, its ability to sustain its current poosition will be undermined in the long term by poor investment decisions and the possibilities of a Far East tiger collapse (just ten years since the als one) remain quite high in the longer term.
I would see this as an ideal script for potential globalisation --, where we have China, UK, Dutch , Bank, Financial Institution, Muscle power, job insecurity, business expansion, greed and perhaps unpredictable climax.
Would love to involve private equity also -- that would attract far greater audience than already mentioned huge interest.
Both Barclays and ABN AMRO are signatories to the Equator Principles. The former is (and the other may soon be) owned by China Development Bank and Temasek whose businesses are not known for paying great attention to the social and environmental impact of their investments - whether in China (especially Yunnan province - www.globaltimber.org.uk/sino-forest.htm) or elsewhere. Potential conflicts of interest? Will "Asian values" dominate or will any such osmosis be in the opposite direction?
If Barclays win in the ABN Amro deal I'll eat my hat. RBS have more clout and already own 10% of The Bank of China. It's just a case of Marcus come lately...
On the topic of globalisation I see the FT today is running the results of an FT/Harris poll on what people think of it.
Interestingly the only country that seems less concerned is Germany presumably because they have a very healthy trade surplus particularly in goods.
Lousy Human Rights record? Is Dick referring to the United States? As for China's record on Poverty, she is the main reason for the massive decrease in global numbers of people moving out of Absolute Poverty, which for the first time in 30 years was below the 1 billion mark. The UK and United States are stacked up in debt which is bought in its billions (in both GBP and USD) by the Chinese and now we are looking to protect ourselves from investment by our Creditors? An excellent way of liquidising this debt and extracting profits to re-invest on both sides of the globalisation coin. In the UK through much needed cash injections in our Industries (hopefully in R&D) and for the poor of China through infrastructure, SEZ initiatives and public services (which will undoubtedly involve the assignment to world-class British architects, construction companies and other Contractors).
I don't see any reason to be concerned. Barclays is one bank, of many in the UK and the Chinese state and Singapore are colectively purchasing 10%. Don't many UK banks own that sort of share in Chinese banks? Shouldn't we welcome that sort of inflow from China, as that will make a dent (albeit small) in the balance of payments? What right do we have to prevent them buying into our country, when we having been buying into China heavily for the last 10 years or so?
This is globalisation at work, and I for one welcome it. China and Singapore now have a vested interest in the UK banking sector. They have a greater incentive not to damage it.
Wow, anyone into zenophobia? Maybe a move to the USA would cheer you up.
Free trade is free trade, not we can buy your assets and resources but we will block your attempts to do the same.
If the UK government had been more economically minded with the money from north sea oil then they could have bought foreign assets. But on the bright side at least we have the millenium dome (O2).
What's the fuzz about chinese owning Barclays? HSBC came from China (HK). Full name is Hongkong and Shanghai Banking Coperation. The board might be very English, but they got Midland bank many years ago and expanded HSBC into the world top 5 (I believe it is second biggest actually, don't quote me that) bank.
So what's the fuzz?
The experience is rather like seeing an established local business selling out to a large City firm. Only the scale is different – the testosterone-fuelled bully boys from London look puny against the new kids on the block.
The problem with these business structures is one of power. The bottom line is that democracy should tend to favour things that are good for the public interest, and should move against things that are detrimental. We must find ways to allow democracy to have its say in whether these changes are desired. Doing nothing is not an option in any competitive environment, unless we want the big guys to walk off with everything. History shows this is the natural outcome of big business, unless we bring it sharply to heel on occasion.
Hey, if you're private equity or a financial institution receiving the investment, why should you care about where the money comes from? Communist China exerting significant financial control over major international financial institutions - no problem! Anyway, it's been a few days since Steve Schwarzman has received a decent payday and his funds are probably in need of replinishment.
Firstly, why did this remind me of the huge spending worldwide of Japanese companies a few years ago?
Did Japan gain lots of influence from that?
No.
Secondly, from past, we have learned that the world is quite worried about china's economic power. If there is concern that the deal will breach the local national security, the deal will simply be blocked by the local authority.
So, bearing in mind that nowadays, lots of things can be branded 'national security', I would not think that Chinese government will eventually be the major shareholder of many worldwide corporations.
I just hope that they do not end up buying lots of crap companies.
If it is OK for Barclays to buy ABN, for RBS to own a 10% stake in a Chinese bank, for HSBC to own 62% of Hang Seng Bank, what's wrong with the Chinese and Singaporean investment institutions owning a piece or all of Barclays? Your columns are monumentally xenophobic Mr Peston.
Sooner than later China is set to strengthen its position in world financial market. All major financial bodies should start learning the way that would involve emerging asian economies to a greater extent.
Having spent two years living and working in China, I view this deal with some internal polarisation.
While it is welcome that Chinese money would come into a UK financial institution, I can't help but worry.
This is why:
The only foreign investors making money in China are those who are in the export trade.
True, there are a few exceptions, but more and more companies are finding that selling to the Chinese is almost impossible.
Chinese banks generally do not make money, along with the massive-loss making Securities industry. Why would you want to get into an economy whose figures do not add up, and whose laws protect only the home team?
Barclays would not so much lose much, but would not gain anything either.
Michael (no16) says that we are being xenophobic because HSBC and RBS have stakes in Chinese banks and this is only a stake in Barclays.
If it was just taking a stake, looking for a higher return than on US T bonds, then fine. But we shouldn't be naive, this is clearly lining Barclays up for a takeover. And let's be clear this would not a takeover by a commercial bank with an interest in employees, customers and other stakeholders. This would be a takeover by an arm of the unelected, undemocratic, communist government of China. That, in my view and the view of many others, is unacceptable.
And don't forget, the reason that foreign banks only have stakes in Chinese banks and not outright control, and that applies pretty much across the board in China, is that the state doesn't want foreign ownership of Chinese business. They want to build their own giants and use them to take over our companies and take our technology and jobs.
And while I fully accept that the Chinese people have every right to a more prosperous future, we should be careful that it doesn't damage ours.
So Tinker thinks RBS have it in the bag, I think the next few days will show quite clearly that Barclays are strongly in the driving seat and the momentum will grow. Sorry to spoil it for RBS and Tinker, keep that hat handy Tinker, I will supply the wine when you eat your words and your hat.
# 12 - Mizuno
The difference (to hsbc) is that this institution is a front for the Chinese government.
Its not just the chinese; heard of Delta-2 ( Qatar government) or Gazprom (Russian government)?
Only in Britain do we allow foreign governments\dictatorships to "nationalise" large parts of the British industry...
If British companies do not work with the Chinese, companies from other countries will. It means lost of business opportunities and less competitive British firms. There is no use wasting time concerning where the power will shift. British companies should dare to jump on the boat when the boat sales to the east. Britain is already falling far behind other countries in setting their foot in China. Remember, it is not a Sino-British relationship, it is the competition between Britain and the rest of the developed world.
It is essential that Britain and its companies continue to move into new markets and to capitalise upon any opportunites that arise.
Failure for us to seize opportunites and sit pretty will severly damage Britain in the future. Anyone remember the industrial revolution and Britain's arrogance that we would remain the top man? We cannot let that happen again and I believe that the is a positive step to keep us in the 'game'.
re 21 Prof Pat Pending
do you have proof to accuse such investment to be from dictatorship?
or is it just day-dreaming?
Lai chin stated about China being the No 1 economy but why does she live in Britain a No 2 economy?
This is a very important investment for the chinese goverment into a big UK financial institution .
But, the goverment take any notice of it, after the industries now its time for the banks to go.
Superbe, what a naive, dangerous and irresponsable goverment you had in this country.
Barclay will no longer invest in britain but in China, and all the skills that country has built in the financial sector will go to the chinese and after they will beat us!!!!
Of course we should be opend to the world but we are to naive, how will this country will compete in future!!
Europe is the solution, with an economic and pilitial strategy will ensure us prosperity, openess and strengh toward our competitors that will be the future.
But this goverment will take any notice of that but one day they will regretted when its to late and this country will be rellegate at the end!!!
In this battle an old saying sums it up best for me. "One mans meat is another mans poison ".It seems to be assumed that what is a bad deal for Barclays is automatically a bad deal for the Consortium. Barclays share price went down when their deal was first publicised, and since then whichever of the bidders seems to be favourite to succeed has a reduction in share price. The consortium is not a 40 odd billion company trying to swallow another 40 odd billion company,which could well cause a very large dose of indigestion.RBS can very easily digest the portion of ABN which is now not very big since the sale of La Salle, and even if the acquisition did not yeild returns in the short term,the relatively small number of new shares issued can be serviced by the present earnings without any reduction in dividends to the present shareholders, so it seems to me that the old saying quoted is quite appropriate in this case.
re: 24
Perhaps 'Military dictatorship' is a better description of the regime which is willing to run its own citizens down with Tanks. One of the most oppressive regimes on the planet where even reading this blog is even banned.
Ask Shell or BP what happens when this kind of foreign government applies 'pressure'....
Re no 24
If proof is required, just ask the dalai lama...........
What is so wrong with a UK GLOBAL bank having investment from the far east, particularly China? We live in a global village now and it is here to stay.
I work in central london commercial real estate and foreigners are nearly always at the front of the queue to buy the best buildings. There is no outcry about this. Barclays, like a property, is an asset, pure and simple. The funny thing is that the Chinese do not own a large stake, so would have virtually no control over how the company is run.
We (in the UK) have access to buy assets in most markets, including China, where a number of UK banks and institutions own parts of Chinese Banks! Global flows of capital are rising all the time and the trend is unlikely to be reversed.
So in summary, it is hard to understand the hysteria when it purely represents the reality of global capital markets.
If Barclays think that with help from China that they have won the race for ABN, then they have under estimated the very clever Mr Goodwin. Fred the shred will not leave the party when he has put this much effort into the deal.
There may well now be a deal within a deal??
Could this be the start of Global banking in a new light?
It looks like now we have clash of the Titans with Varney v Goodwin
My money is on Goodwin
the world should be careful china is buying debts ,,companys and assets in other countrys....the main reason is to attack taiwan if the buy things in other countrys that country will not put sanctions on china or attack it ...china is spending big on its army ,,navy,,and airforce so people who buy things made in china are now playing with fire ,,
China is not a freind its an asset stripper it wants the worlds resources not just banks, people have very little value and no rights.
World is full of irony...
Just a few years ago Western countries thought about China as a supplier of cheap products, and just i a few years, taking into consideration all vast sums of currencies that China owns, Western World will be working for a Yellow Man... - the economic paradigm shift is just a matter of time. And that's fascinating about a global economy - you for sure cannot be bored of...Romans did their job, so did Americans, it's Yellow time now!!!
I suggest louis fernandez do some researches about China before making a comment here. When you were trying to spread this offensive remark about China, you were insulting yourself by showing us your ignorance and asperity.
Please just be nice and don't lie.
I welcome Chinese investment in the UK. Just like how the markets go through a cycles, so does the balance of power and wealth. The west (America and Britain) has been in power far too long and it is natural for a new challenger to enter the arena. I believe within the next 10-15 years, the Chinese will be policing the world, not America. People who tarnish China with the human rights brush, do not have hindsight. The US, Britain, and mainland Europe have poor human right records... such as colonisation, slavery. In fact Barclays bank itself has a history with slavery. China has done very well to lift millions of people out of poverty, and I hope it has a knock on effect on the rest of the developing world.
The story China-USA resembles so much the one Tesco-customers:
Yankees complain how much American companies suffer from the import of cheap Chinease consumer goods and in the same time, the same Americans enjoy so much bying these goods litteraly for pennies.
Tesco story is not less ambivalent. People complain about the power that Tesco has, and then having possibility of shopping wherever they want they go straight to Tesco for a shopping bonanza there...
The inconvenient truth is that both globalisation and giant supermarket chains boost our purchasing power and therefore our standard of living! And in the same time millions of people in China managed to get rid of poverty. Surely it's a win-win situation. We live in a beautiful and better World!
Reply to Mizuno - HSBC was started by a group of Scottish people. It relocated it's Headquarters to the UK when HK was given back to China. It may have a large presence in Asia but it is definitely not Chinese.
ABN is a global organisation about to be broken apart by another global organisation. The takeover is nothing but corporate cannabalism.
CDB are not interest making profit on invest in Barclays, no they will attempt to take up large stake in Barclays or have big (probably not any) influence on board at any time, even if they want it, they know it will to be block by politicians or Barclay own board. and I don't see there is any threat, all they want is some banking skills and financial products.
You pay the price and expect something in return and I think it's fair way to do the business, and this is great opportunity for Barclays crack into big Chinese market and may good for their future business expending, if you don't then there always someone else will. with ever competitive globe market out there, we see plenty bank merger or take over before, if you are not bigger enough withstand in globalised market, the chance you will be squeeze out by other bigger one.
and one thing for sure,in the market business, we don't want any influrence from goverment like China (CBD is state controled bank) where one MAN says so
In response to the first posting-
English is and will always be the international language for a reason Furthermore would china have the "brains" to be where they are without Hongkong and the knowledge gained from it who the British must take credit for creating