China ban spooks banks

September 3, 2001 Posted: 1338 GMT

LONDON (CNN) -- Top investment banks have scaled back their contacts with Taiwan after China penalized CSFB for doing business with the island nation, a report said. 

The Beijing government last week barred CSFB, the investment bank unit of Credit Suisse, from taking part in future equity offerings in China to show its anger at the bank's involvement in Taiwan's fund-raising efforts.

CSFB offended the Chinese by hosting investment forums in which Taiwanese government officials took part. The Wall Street Journal said Monday a number of leading banks had axed plans for similar events in light of Beijing's displeasure.

In recent weeks, Goldman Sachs Group Inc. (GS: Research, Estimates), Merrill Lynch & Co. (MER: Research, Estimates), J.P. Morgan Chase & Co. (JPM: Research, Estimates), ABN Amro, and Daiwa Securities all called off plans for similar investor road shows in the United States and the Pacific Rim, the Journal said in its online edition, citing unidentified executives at several of the banks.

The report said some estimates put the probable value of Chinese equity offerings during the next year at more than $20 billion. 

China regards Taiwan as a renegade province. Taiwan maintains it is independence, after a civil war in 1949. Since that time, Beijing has done its best to limit the island's official ties abroad, putting pressure on other nations not to accept visits from Taiwanese leaders.

But the action against CSFB appears to be the first Chinese action against an investment bank for doing business with Taiwan's government, the report said.

CSFB was due to underwrite a stock offering later this year for Unicom Group, China's second-largest telecom company, but was dropped from the deal after angering Beijing over its contact with the Taiwan government.

The Journal cited an unidentified banker as saying his company received a phone call from a Beijing official warning of "big trouble" for banks involved in road shows like the ones organized by CSFB.

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