OPPOSITION from the Chinese government may stop Citigroup Inc's plan to raise capital by selling a stake worth US$2 billion to a Chinese bank, the Wall Street Journal reported on its Website yesterday.
The cash-strapped Citigroup, hurt by the United States subprime mortgage crisis that boiled up last year, has been seeking foreign investors, including China Development Bank, to boost its balance sheet in the face of mounting write-offs.
The newspaper reported that opposition from the Chinese government seems to have surfaced over the weekend, citing an unnamed person familiar with the situation. It is not clear whether the deal has been abandoned, the newspaper said.
Yang Hua, director of the Chinese bank's news department, said she was not aware of any plans for the bank to invest in Citigroup or any government opposition to any such investment, according to the paper.
The US financial group is hoping to announce a capital injection from investors when it releases its fourth-quarter earnings today, the newspaper said.
Citigroup has already gotten US$7.5 billion from the Abu Dhabi Investment Authority. On November 26, ADIA bought a 4.9 percent stake in Citi, becoming its largest shareholder.
The possible failure of CDB's plans to invest in Citigroup comes after a series of Chinese institutions have put money into struggling Wall Street firms. Most recently, China Investment Corp, the country's sovereign wealth fund, agreed to invest US$5 billion in Morgan Stanley.
The CDB, which was established in 1994 and is now preparing to become a commercial lender, got a US$20 billion injection on December 31 from CIC.