US investment firm Newbridge Capital was told that its acquisition of Shenzhen Development Bank will not go ahead, the Financial Times reported. The Shenzhen municipal government had agreed to sell Newbridge a stake of just under 20 per cent, making Newbridge the largest shareholder and giving it management control. Although the deal had apparently been approved by both the local and central governments, the bank issued a statement saying that the sale would not take place and the management team installed by Newbridge would be disbanded. Newbridge responded to the announcement by demanding that the government honour its contract and proceed with the sale.
No explanation was given for the decision not to sell, but Chinese analysts said that the probable reason was that local interests feared the loss of their special relationship with the bank which municipal control gave them. Although several foreign banks have taken stakes in Chinese banks, none have exceeded 10 per cent.