By: Ainsley Brown
The Industrial & Commercial Bank of China (ICBC) has reportedly signed a deal to acquire the majority stake in the US subsidiary of Bank of East Asia. The deal signed during the recent state visit of Chinese President Hu Jintao to the US is not final and still has to be approved by US regulators. It will be interesting to see how the regulators will rule given the high anti-China rhetoric and sentiment so prevalent in the US currently?
ICBC is not alone in expanding globally and its US move is reflective of a wider trend amongst Chinese state-owned financial institutions to expand aggressively outside of China. Given the expansionist mode of these state-owed financial institutions, the ICBC foray in to the US market should prove to be a test case for other Chinese financials considering a US entry.
A watchful eye should be kept on the US Federal Reserve with its banking oversight preview as it has the power to veto the deal. Additionally, the very powerful Committee on Foreign Investment in the US (CFIUS) may also have to be watched, however, it is interesting to note that the size of the deal may not be big enough to attract CFIUS attention. It is also interesting to note that since this is China and a state-owned entity size may just not matter – but we shall see.