LONDON: China’s economy has more than doubled in size in five years. It has some of the biggest banks in the world. And its appetite for snapping up natural resources is undiminished: witness this July’s $15.1 billion agreement by state oil company CNOOC Ltd to buy Canada’s Nexen Inc, the biggest foreign acquisition to date by a Chinese company.
One reason why China is treading carefully is that it its sovereign wealth fund made big paper losses when it bought stakes in fund manager Blackstone and investment bank Morgan Stanley before the financial crisis broke.
London’s ambitions to become a hub for trading the yuan, together with Chinese corporations’ growing presence in Europe, should ensure plenty of opportunities for further organic expansion whether takeovers eventually flourish or not.
“We increasingly see Chinese service providers following their domestic clients abroad to provide support with overseas operations. Chinese banks, now present in all major European markets, are an example,” Rhodium said in a recent report.
As European banks retrench to recover from the global financial meltdown, they are finding ready buyers in Asia for everything from loans to entire insurance and broking operations.
There are other tell-tale signs of a shift in power: this year’s two biggest initial public offerings after Facebook were launched not in the United States or Europe, but in Malaysia.
Yet perhaps what is more striking is that, with one or two exceptions, Asian financial firms are not doing more in Europe itself to capitalise on the euro zone’s festering debt and banking crisis.
When it comes to the financial sector, however, the glass is half-empty, not half-full, said Andre Loesekrug-Pietri, chairman of A Capital, a China-Europe investment fund.
“There’s a front-cover story every other month about China buying up the world, but China is still a very small player in international M&A,” he said.
David Marsh, co-founder of a forum in London that connects central banks and sovereign wealth funds with banks and asset managers, said the West no longer had a monopoly on innovation and dynamism in financial services.