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Last Updated: Monday, 23 July 2007, 16:25 GMT 17:25 UK
Chinese cash fuels Barclays bid
Barclays symbol
Barclays is attempting to raise enough finance to take over ABN
The Chinese and Singapore governments have become key investors in Barclays, helping the UK firm to raise its offer for the Dutch bank ABN Amro.

The China Development Bank (CDB) and Temasek, the investment arm of the Singaporean government, have invested 2.4bn (3.6bn euros) in Barclays.

And they will invest a further 6.5bn if the ABN takeover goes through.

Barclays has said it will now pay 45.4bn (67.5bn euros) in cash and shares for the Dutch bank.

Business opportunity

A group led by Royal Bank of Scotland (RBS) is also vying for ABN and its current offer is higher than Barclays' revised bid.

Shares in Barclays -rose after details of the Asian tie-ups emerged, closing 3% higher at 735 pence.

BBC business editor Robert Peston
The deal shows the enthusiasm of western institutions to tap into the huge Chinese market
Robert Peston
BBC Business Editor

The BBC's Business Editor Robert Peston revealed on Sunday that the Asian deals were being negotiated.

He said that Barclays would be hoping that its new relationship with the CDB would yield it hundreds of millions of pounds in extra profits from doing new business in the Chinese economy.

If Barclays acquires ABN, the Chinese state would emerge with a shareholding of 7.7% in the enlarged group.

It has pledged not to raise its stake to more then 9.9% of the group over the next three years.

A smaller stake of about 3% would be taken by Temasek - which is owned by the Singapore government but says all investment decisions are made independently.

The company, whose chief executive is the wife of Singapore's prime minister, has about $80bn under management.

CDB is under direct control of the Chinese State Council and its governor has the rank of a government minister. At the same time analysts see the CDB as one of the country's most commercial institutions, financing industries including petrochemicals and railways.

The latest instalment in this major banking tug of war has yet again thrown into doubt the identity of the eventual winner
Richard Hunter, Hargreaves Lansdown

Barclays chief executive John Varley said that he was "entirely comfortable" with the involvement of the Chinese in the business.

"This is the biggest external investment they have made and they have chosen Barclays," he said. "There should be a significant and positive reaction in global markets."

Potential controversy

The Asian deals were arranged by the leading US private equity house, Blackstone - which recently sold a 1.5bn stake in itself to the Chinese state.

The Chinese state has $1.2 trillion of foreign exchange reserves to invest, much of which has been placed in US Treasuries or government bonds.

China recently signalled it would be taking a more imaginative and aggressive approach to how it invests its war chest, including buying significant holdings in overseas companies.

Beijing ending up with an influential stake in such an important European financial institution as the merged Barclays/ABN may prove controversial, Mr Peston added.

"When the initial excitement has died down, there will be some politicians and business people who will wonder whether when China buys abroad on this scale, the balance of economic power may be shifting eastward in a way that should concern us," he said.

RBS remained favourite to win the battle for ABN Amro because its offer was higher and had a greater cash element said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.

But he added: "The latest instalment in this major banking tug of war has yet again thrown into doubt the identity of the eventual winner."


SEE ALSO
China could buy stake in Barclays
23 Jul 07 |  Business
Court approves ABN's LaSalle sale
13 Jul 07 |  Business
New twist in ABN Amro bid battle
26 Jun 07 |  Business
RBS sets timetable for ABN offer
22 Jun 07 |  Business
Unions meet Barclays over ABN bid
21 Jun 07 |  Business
Barclays 'may improve ABN offer'
13 Jun 07 |  Business

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