Bo's purge hurts Chongqing's finance hub bid

PUBLISHED : Tuesday, 03 April, 2012, 12:00am
UPDATED : Tuesday, 03 April, 2012, 12:00am

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With the dramatic removal of Bo Xilai as Chongqing's top party boss last month, his dream of transforming the city into a regional financial centre may be slipping away.


At least two global firms that had been in talks with the Chongqing city government to set up yuan-denominated private equity funds there have decided to put negotiations on hold due to concerns about political uncertainties in the city, say people familiar with the matter.


TPG Capital, which said in February that it had raised 4 billion yuan (HK$4.9 billion) for two yuan funds (one in Shanghai and another in Chongqing), is considering shifting more resources and business focus to Beijing and Shanghai, industry insiders say.


'Chongqing tried very hard to make TPG a good example in the hope that the city could attract more foreign funds, but the case of Bo Xilai has suddenly changed the whole game,' said one such insider.


In addition to the Shanghai and Chongqing funds recently raised by TPG, the US private-equity giant has already been in talks to set up a new Beijing-based fund venture, say people with knowledge of the matter. TPG declined to comment.


Last year Bo's administration in Chongqing was keen to help TPG raise capital for its yuan fund. Bo is considered popular among foreign investors, thanks to his previous tenure as the nation's commerce minister. The state-owned Chongqing Liangjiang New Area Development and Investment Group and Zongshen Industrial Group, one of Chongqing's leading private firms, became major investors in TPG's Chongqing-based fund.


TPG will keep its Chongqing fund going after Bo's downfall but it is unlikely that TPG will invest further at this stage, says one of the insiders.


Last year TPG said it aimed to eventually raise 5 billion yuan for the Chongqing fund alone and the February announcement was only intended to meet the fund-raising target in the first phase.


Shanghai, Beijing, Chongqing and Tianjin are all vying for foreign investors such as TPG and Blackstone to establish local yuan funds. Bo was keen to make Chongqing an important financial hub for the central and western part of China.


Separately, Southwest Securities, a Chongqing-based mid-sized national securities broker, has experienced difficulties in retaining clients, industry insiders say.


Bo, whose late father, Bo Yibo, was a vice-premier, was sacked on March 15 as Chongqing's party chief following Beijing's probe of Wang Lijun, Chongqing's former police chief, who tried to seek asylum at the United States consulate in Chengdu.


Shortly after Zhang Dejiang, one of the nation's four vice-premiers, replaced Bo as Chongqing's new party boss, Zhang and other city officials met many businessmen including top bosses from Wharf, a major Hong Kong developer, and BASF, the global chemical giant. The move was to shore up foreign investors' confidence in the city.