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Last Updated: Friday, 12 August 2005, 09:26 GMT 10:26 UK
US grows wary of China flotations
Bank of China sign
Bank of China's flotation is set to be one of the biggest
Chinese firms planning to sell shares in the US could spark an asset bubble to rival the dot-com crash, a key panel of the US Congress has warned.

Richard D'Amato, chair of a commission advising on economy and security, told a Congressional hearing that investors needed to be aware of the risks.

Chinese banks in particular are set to float shares worth billions in the coming months.

US-China tensions have risen after bids by Chinese firms for US companies.

Among the recent deals was the purchase of computer giant IBM's desktop PC business by Lenovo.

I fear the Wall Street crowd that brought us the hi-tech bubble is now fast creating a new China bubble
Richard D'Amato, US-China Economic and Security Review Commission

Several more have failed - often amid severe criticism from US lawmakers.

The most prominent has been the attempt by Chinese energy firm CNOOC to buy Unocal. Its offer was spurned in favour of a lower bid from US giant Chevron.

Mr D'Amato's US-China Economic and Security Review Commission was a key opponent of CNOOC.

Loan risk

In this case, though, the focus of Mr D'Amato's concerns is the use of the US stock market to raise money for Chinese corporations.

In particular, he said, he was worried about the mountain of bad debts believed to be held by Chinese banks wanting to float on Wall Street - and the institutions' lack of transparency.

"Questions need to be raised regarding the loan portfolios of these institutions," he warned.

"I fear the Wall Street crowd that brought us the hi-tech bubble is now fast creating a new China bubble."

But several witnesses were keen to urge the US to embrace the opportunities the flotations offered.

"It is vitally in the interest of the US that our capital markets' regulatory regime be shaped and administered in a way that encourages access to US capital markets by foreign issuers... while at the same time protecting US investors," said Robert DeLaMater, a securities lawyer.

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