When Bank of America was negotiating to take a stake in China Construction Bank four years ago, advisers who worked on the investment gave it the code name “Project Solidgold”.
Yet the landmark “strategic” relationship between the US and Chinese lenders has conspicuously failed to glister. BofA was among a wave of overseas financial institutions that in recent weeks sold down their holdings in their Chinese counterparts as soon as lock-in periods expired.
The stake sales, driven largely by the foreign banks’ urgent need for capital, have angered China – prompting fears that the fallout will hamper the scope granted to overseas banks in the mainland financial services market for years to come.
“The institutions that bought stakes in Chinese banks with promises of helping them to improve their risk management, but later crashed out, will not be seen positively in China,” says Andrew Crockett, president of JPMorgan Chase International and former head of the Bank for International Settlements, the central bankers’ bank.