The Washinton Post reports today that Citic Securities, a Chinese firm controlled by the Chinese government in Beijing, would acquire a nearly 10% stake in Bear Stearns under a proposed joint venture. China has never purchased a stake in a Wall Street investment bank, previous to this announcement.
This deal represents China’s growing influence in the global finance, as well as the diminishing strength many U.S. firms seem to be exhibiting.
Post reporter, Tomoeh Murakami Tse, explained a problem it might create for U.S. firms:
Some analysts said the Chinese investment in Bear Stearns would make it difficult for another firm to take over the Wall Street firm. Still, the analysts said, Chinese entities looking to expand abroad are aware of the sensitivities involved and said Citic’s approach to Bear Stearns apparently reflects lessons learned from the Unocal failure.
“The Chinese are . . . saying, ‘Well, let’s do this in a fashion that’s not as offensive, perceived to be less threatening,’ ” Jiang said. “Nevertheless, China has the ambitions. China has the capabilities of a global player. . . .”
This deal comes in the wake of a large number of foreign buyouts of U.S. companies. It raises questions about the increasing weakness of the dollar, and the decreasing soveriegnty of the U.S.
This deal also comes on the heels of a warning by IMF head Rodrigo Rato on Monday who said “There are risks that an abrupt fall in the dollar could either be triggered by, or itself trigger, a loss of confidence in dollar assets.”