A delay in a government decision on a $3 billion bid by Citigroup for China's Guangdong Development Bank suggest authorities are wary of relaxing limits that prevent foreign lenders from taking majority stakes in local banks.
Citigroup executives have refused comment on reports that a consortium led by the US banking giant has bid for a majority stake in the struggling bank based in the southern province of Guangdong.
A government decision on the deal had been expected before the Chinese New Year holidays in February, and then later possibly during Chinese President Hu Jintao's visit to the United States last week.
The state-run newspaper China Dailyreported today that China was unlikely to loosen controls that restrict foreigners to a maximum of 25 per cent equity in Chinese banks, with investments by any one bank capped at 20 percent.
Chinese regulators have been encouraging foreign banks to take strategic stakes in the industry, both as a source of funding and to upgrade local bank services with foreign managerial and technical expertise. The industry is preparing to open local financial markets to full foreign competition late this year.
But Chinese leaders have stressed their insistence that the government retain controlling stakes in major state-run banks. Sales of billions of dollars in bank equity have also prompted a debate over whether foreign investors are paying enough.
"We are studying the issue," Jiang Dingzhi, vice chairman of China Banking Regulatory Commission, said last week when asked about the Citigroup bid.
However, Jiang said there was no timetable for China to ease its limits on foreign investments. Any such changes are unlikely in the near term, he said.
Citigroup's bid for Guangdong Development Bank had fuelled speculation that the authorities might relax that requirement for smaller banks.