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Citibank to buy 5% of Pudong Bank

By Alex Frew McMillan

shanghai bund
Shanghai is a popular destination for overseas investment, helping it to 11 percent growth last year

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HONG KONG, China (CNN) -- Citibank will buy 5 percent of Shanghai Pudong Development Bank, the Chinese bank said on Thursday, in its first deal to buy into a Chinese financial institution.

Pudong Bank said on Tuesday that Citibank was becoming a strategic investor but gave no further details of the size of the stake. (Full story)

The banks have now agreed to view each other as exclusive partners and have agreed to extensive cooperation, Pudong Bank said in a statement.

"Citibank will acquire five percent of our bank's total share capital as a long-term strategic investor, and the acquisition has been approved by the government," the statement declared. It was published in local newspapers.

A popular destination

Many overseas institutions are keen to tap the estimated $1 trillion in deposits that China's 1.3 billion population has left with its banks.

Local banks are also keen to line up overseas partners to bolster their books and lend management expertise ahead of a deadline for the industry to open to overseas competition by 2007.

The boomtown of Shanghai is a popular choice to seek a local partner. New figures showed this week that the city's economy surged 10.9 percent in 2002, the strongest growth in five years.

That outstrips the national 8 percent growth, thanks in large part to the $10.6 billion in contracted foreign direct investment that came into Shanghai in 2002.

The city approved 3,012 projects involving overseas investment in 2002, led by companies from the United States and Hong Kong.

HSBC starts online banking

London-based HSBC, the biggest bank in Hong Kong, became one of the first overseas banks to buy into a Chinese partner in 2001, when it took an 8 percent stake in the Bank of Shanghai.

HSBC and its subsidiary Hang Seng joined the Bank of East Asia this week in offering online banking in China, the first overseas institutions to do so. (Full story)

Shenzhen Development Bank is selling a 20 percent stake to U.S. buyout fund Newbridge Capital Group. That will give Newbridge effective control of the bank.

A report stated this week that Daiwa Securities will become the first Japanese brokerage to open a joint venture in China, when it sets up a partnership with Shanghai International Group Corp. (Full story)

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