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China

Ping An deal lends CDB a lesson

The proposed sale of HSBC's stake in Ping An has raised questions about transparency at the mainland bank involved in the transaction

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CDB is rated as one of the world's safest lenders. Photo: David Wong
George Chen

HSBC's high-profile, US$9.4 billion sale of its entire stake in mainland insurance giant Ping An has so far delivered only one thing for China Development Bank chairman Chen Yuan: a lesson that perhaps it is time for his bank to be more transparent following years of fast credit expansions, largely owing to Beijing's support.

In early December, when the deal was first announced, CDB initially agreed to put up more than 60 per cent of the US$9.4 billion that Thailand's Charoen Pokphand (CP) Group needed to purchase HSBC's 15.6 per cent stake in Ping An, the mainland's No2 life insurer.
More recently, the bank has been widely reported to be considering vetoing the loans for CP, signalling that the eye-catching acquisition may be in trouble. The reports raised a host of concerns and questions in the market about the reasons for CDB's shift.
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Which decision-makers at CDB initially signed off on the deal? What led the bank to change its mind so rapidly? Did top bosses at CDB, a capital-rich state-owned bank that is directly overseen by the State Council (China's cabinet) know that there was a secretive behind-the-scenes second buyer involved in the deal? And why has CDB - unlike HSBC, the China Insurance Regulatory Commission or CP, which claims to be the only buyer for the Ping An stake - stuck with a policy of absolute silence so far?

People close to the situation told the South China Morning Post that a high-level external source told senior executives including Chen after they agreed in principle to offer loans to CP that the Thai firm might not be the real buyer and ultimate owner of the Ping An stake. Just a few days after HSBC officially announced its plan to sell the stake to CP, which was the only buyer named in legal documents, the source told Chen (who is the son of late top Communist Party leader Chen Yun) that Xiao Jianhua, a financier with a mixed reputation on the mainland, may be involved in the deal, the sources told the Post.
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The information was given to Chen about two weeks before the news about Xiao's role in the deal became public in a report by the respected financial magazine Caixin Century Weekly in late December - news that was quickly followed up by other media.

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