Related Event: Banking Secter in China
SHANGHAI, China - General Electric Co. plans to buy a 7 percent stake in China's Shenzhen Development Bank in the latest foreign strategic investment in China's increasingly competitive banking market, reports said Thursday.
Through the purchase, valued at about $100 million, GE Consumer Finance hopes to gain entry into China's developing personal loan market, the reports said.
The two sides held a signing ceremony for the deal at Beijing's International Club on Wednesday, with an official announcement expected once relevant government departments approve the deal, the state-run China Securities Journal reported.
It said a reporter for the newspaper was barred from attending the signing ceremony by company executives who were "strictly blocking" any news of the deal.
Trading in Shenzhen Development Bank's shares was suspended on the Shenzhen Stock Exchange beginning Wednesday pending an "important event to announce," the company said in a legal notice.
U.S. private-equity company Newbridge Capital already has a controlling stake of nearly 18 percent in the bank, based in the southern city of Shenzhen, which borders Hong Kong.
China limits total foreign investment in any single bank to under 25 percent. The GE purchase would put the total foreign stakes in the bank at about that limit.
The purchase would bring to Shenzhen Development Bank much needed capital, media reports said. According to the China Securities Journal, the agreement also calls for the two to cooperate in developing information technology systems for the bank.
According to statements posted on GE's Web site, the company has a goal of reaching $5 billion in sales in 2005 ¡ª spanning a wide range of industries.
China's banking industry is due to fully open to foreign competition in late 2006, and foreign banks and other financial institutions recently have stepped up investments, with a slew of deals announced in the past few months.
Swiss bank UBS AG announced Tuesday a 645 million Swiss francs ($500 million) investment in state-owned Bank of China, the nation's second-largest bank, to create a partnership in investment banking and securities services for Chinese clients.