According to a recent statistic published by China Union Pay, Chinese banks have issued more than 1.3 billion debit, credit and ‘quasi’-credit cards through the end of September.  This means that, on average, every man, woman and child in China now carries a piece of plastic.  Quite a staggering number and, at first glance, quite promising. 

Two years ago in 2005, GE agreed to buy a 7% stake in Shenzhen Development Bank, which at the time was worth US$100M.  However, the deal had been held up due due to disagreements amongst the shareholders, one of which was the private equity group TPG.  Most of the disagreements centred around government requirements on share restructuring as the initial agreement would have significantly diluted TPG's stake in the bank.  TPG eventually did agree to modified terms, but yesterday Shenzhen Bank terminated the agreement.  

Not to miss the ‘invest in China’ boat, yesterday, Bear Stearns and Citic Securities announced a co-investment partnership agreement.  If everything is approved by the regulators, which it likely will be, Bear, the darling of the CDO market, will invest US$1B in the Chinese brokerage, which will convert to a 2% stake over 6 years with the option to increase that to 7%.  Conversely, Citic will invest the same in Bear, which will convert to 6% stake in Bear over 40 years, and will have the option to increase this stake to 9.9%.  Most of the non-Chinese operations will likely be a co-branded operation and it’s yet unclear what the Chinese operation will look like.

For the past few weeks, most of the major news in China has centred on the Communist Party Congress.  This is an pretty important event in China that happens once every 5 years and usually results in a number of far-reaching policy and people changes throughout the country and government.