Thursday, December 20, 2007 6:13 AM
by
will
China buys into Morgan Stanley, cue ominous rumbling
Oh no! The Japanese Chinese are buying up all of America's property investment banks! Is this the end of the American way of life? Probably not. From the New York Times, which reports on Morgan Stanley's mortgage-induced financial woes and subsequent sale of a 10 percent stake to China's sovereign investment fund:
As for the investment from China, Mr. Mack framed the transaction
not as a desperate act but as a strategic move. And he refused to
concede that Morgan Stanley was a weakened firm. “We remain bullish on
Morgan Stanley’s significant growth potential,” he said.
Still,
the investment shows how reliant Morgan Stanley and Wall Street are on
foreign funds and gives additional credence to the joke now circulating
on trading floors: “Shanghai, Dubai, Mumbai or goodbye.”
The
fund, the China Investment Corporation, has agreed to purchase almost
10 percent of Morgan Stanley; it will have no role in the management of
the firm.
Citigroup recently sold a stake to a Middle East fund.
The
deal is an abrupt shift in strategy for China’s $200 billion sovereign
fund and underlines the extent to which it appears to be under the
direct control of the country’s leaders.
Isn't that the essence of PR? Your "desperate act" is my "strategic move". I love that kind of subtle wordsmithing. At any rate, cue sinister yellow-peril rhetoric:
U.S. critics uneasy about China's investment goals
(Reuters)
***
While some U.S. lawmakers welcomed Morgan Stanley's deal as a way to
shore up the investment house, critics expressed unease about China's
longer term objectives.
"We don't know what motivates the Chinese. They have a higher
propensity for mixing politics and economics," said Jeff Fiedler, a
Democratic-appointed member of the U.S.-China Economic and Security
Review Commission. The panel was created by Congress in 2000 to advise
lawmakers on China policy.
"The Chinese don't have a track record," Fiedler said.
The bipartisan commission likely will examine Chinese investments such as the one in Morgan Stanley next year.
"One question is whether, at some point, these sovereign wealth
acquisitions or investments by Chinese government-controlled banks or
companies can lead to influence in or control over U.S. companies
related to national security," said Larry Wortzel, the commission's
incoming chairman.
I would say, if I had to stretch for a total blue-sky, pulled-from-my-ass guess, that the Chinese are motivated by an opportunity to make money. But, hey, I could be naive. After all, given that they've also taken stakes in Bear Stearns and Blackstone Citigroup, it could be a sinister plot to undermine the entire US banking system. Of course, given how much US debt and currency China already holds, it might be a little late to nip any such plan in the bud.
See also:
Australian angry rhetoric here
The latest Pew Foundation research on international perceptions of China. By a small margin, America is still pro-china. Amazingly. (H/T: C.N.Le.)
Correction:
I originally wrote that China had taken a stake in Citigroup. That is incorrect. Abu Dhabi's sovereign fund has invested in Citigroup. China has also invested in Blackstone, which was the third Chinese Wall Street investment that I was looking for.