Communist takeover

There's a good overview in the Observer today about the the growing role of state investment funds, including those from China. I've not blogged on this before, but it has received quite a bit of coverage in the business press over the past couple of years. One interesting bit in the Observer piece is the size of stakes Chinese investment vehicles have taken in some high-profile companies -

Analysts say that Beijing has learnt a lot since 2005 when a Chinese oil company, CNOOC, tried to take over US-based Unocal but was thwarted by opposition on Capitol Hill. Now the Chinese appear to be more content with acquiring minority stakes in Western companies - they hold 7 per cent of Barclays and last month bought a 9.9 per cent share of Blackstone, the US private equity giant that floated on Wall Street.

The point about Chinese investors changing tack from making bids for companies to building up stakes is interesting. Although a lot of people working in the financial system really wouldn't mind selling out a company in its entirety to the Chinese, there is still a large amount of political resistance to the idea, though this seems to be more driven by national pride than concerns about labour standards or human rights. So far such political disquiet makes outright bids less practical, hence the move to building up significant stakes. In the case of Barclays this will also result in a seat on the board - not the greatest advert for good corporate governance.

In the meantime, plenty of people are just happy that the all of Chinese money heading our way is helping keep us afloat:

'Just think about private equity: stock prices have been inflated by the knowledge that cash-rich private equity firms have been circling publicly listed firms and could strike at any moment. Just knowing the Chinese are out there is bound to affect asset values.'

Would be interesting to hear how the dwindling handful of people in the UK who regard China as actually existing socialism see all this!