Cautious China to miss out on global banks firesale

By Kirby Chien - Analysis

BEIJING (Reuters) - China has the cash and ambition to be a major player in the world's biggest sale of financial assets in half a century, but politics, a lack of expertise and an aversion to risk will relegate it largely to the sidelines.

Nationalistic worries about how state-owned Chinese firms might behave if they had a controlling stake in a major foreign bank are probably Beijing's biggest obstacle, but there are others almost as daunting.

"Chinese financial institutions are not mature enough to make a large overseas acquisition," said Zhao Xiao, an economics professor at the Beijing University of Science and Technology.

"They must gain experience helping China's thriving manufacturers to move overseas ... and in five years they may be ready," said Zhao.

China's cautious regulators are also reluctant to approve such acquisitions due to volatile markets, recent losses from earlier financial stakes and a lack of experience.

"The Chinese may have that ambition ... but that would just not be allowed," said Glenn Maguire, Hong Kong-based chief Asia economist for Societe Generale.

"Politically, it is very sensitive," said Maguire, pointing to rising protectionist sentiment in the United States in a presidential election year.

China's financial stakes in Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) and Blackstone (BX.N: Quote, Profile, Research, Stock Buzz) have also soured as the credit crisis has spread, offering painful lessons in market volatility to investors accustomed to uninterrupted double-digit economic growth.

The expertise required in complex takeovers can also be outside the reach of established foreign banks as well.

After Germany's Commerzbank (CBKG.DE: Quote, Profile, Research, Stock Buzz) bought investment bank Dresdner Kleinwort for $14.5 billion from Allianz (ALVG.DE: Quote, Profile, Research, Stock Buzz) last weekend, it unveiled plans to cut 9,000 jobs.

Commerzbank's shares have fallen 14 percent in response to the deal as the bank said it still needed more cash from shareholders and analysts were skeptical of its ability to turn Dresdner around.

China Development Bank had been seen as a possible candidate to take over Dresdner, though how serious is not known.

For a FACTBOX on China's biggest overseas acquisitions, click ID:PEK172765

MONEY NOT ENOUGH

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