China's Government Could Hamper
Citigroup's Plans to Raise Capital
By RICK CAREW
January 14, 2008 6:22 a.m.
HONG KONG -- Citigroup Inc.'s plans to raise capital by selling a stake of about $2 billion to China Development Bank could be in jeopardy because of opposition from China's government, according to a person familiar with the situation.
Citigroup has been seeking foreign investors, including China Development Bank, to invest in the U.S. lender to boost its balance sheet in the face of mounting write-offs, caused by Citigroup's massive exposure to subprime mortgage debt. Citigroup is hoping to announce a capital injection from investors when it reports fourth-quarter earnings Tuesday.
The Chinese government opposition appears to have surfaced over the weekend. It's not clear whether the deal has been scuttled altogether. The person familiar with the situation didn't give a reason for the opposition.
Yang Hua, director of China Development Bank's news department, said she was unaware of any plans for China Development Bank to invest in Citigroup or any government opposition to any such investment.
The possible failure of the plans to invest comes after a series of Chinese institutions have put money into struggling Wall Street firms. Most recently, China Investment Corp., the country's sovereign wealth fund, agreed to invest $5 billion in Morgan Stanley.
China Development Bank was set up in 1994 as one of the country's three policy banks. China Investment Corp. on Dec. 31 made an infusion of $20 billion into the bank, in a move to turn the bank into a commercial lender.
Last year, China Development Bank bought a stake in Britain's Barclays PLC.
--Zhou Yang in Beijing contributed to this article.
Write to Rick Carew at firstname.lastname@example.org