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Chinese Capitalists Exercise Restraint

January 14, 2008

The banking world is actively seeking to pump up its ledger sheets. Citigroup had hoped to sell shares valued at about $2 billion to China Development Bank as part of a second round of fundraising to improve its books, after huge losses from its exposure to U.S. subprime lending.

After weeks of examination, the Chinese have thought better of the expected move and declined the opportunity after investing $5 billion dollars in Morgan Stanley. The Chinese are savvy enough to know that the purpose of business is to make money. Plugging holes in someone else’s dam when your cash can be spent elsewhere is part of the independence that the Chinese enjoy. They don’t have a huge track record in investing outside their sphere and wisely want to limit their exposure to risk instead of buying continually into western ideas and banking practices, especially at this early time in the banking credit crisis. Even though the Chinese are flush with cash, you have to admire their independent thinking and business minds. Let’s face the facts: Morgan Stanley is more traditionally business-centered and not the same kind of animal as banking investment and junk bond-centered Citigroup. The bankers of the world are bound to turn the business-driven somewhat-skeptical Chinese off. It sounds like it’s time for the Saudis to come to the rescue.

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