Chinese bid for Chicago exchange hits roadblock as Beijing tightens capital controls

A bid led by private Chinese company Chongqing Casin Enterprise Group to take a 49.5 per cent stake in the parent of the Chicago Stock Exchange (CHX) is now unlikely to go ahead given stricter capital controls implemented by Beijing and existing strong opposition from US lawmakers, analysts said.

Chinese investors would own 49.5 per cent of the bourse after the proposed purchase, while the combined voting power of two key investors will be limited to 20 per cent, according to a filing posted on the CHX website on Monday.

The deal comes at an uneasy time as Beijing moves to tighten capital controls to curb the scale of overseas investments in order to cushion the sharp depreciation of the yuan.

“My guess is it will be very difficult for them to get approval. The Chinese government is cracking down on capital outflow... particularly on companies that are buying assets offshore that are not in their core areas of expertise,” said Shaun Rein, managing director of China Market Research.

“Too many real estate and other firms are buying assets that they know nothing about and clearly this is viewed as a way to transfer yuan out and evade capital controls,” he added.

Zheng Zhigang, professor of finance with Renmin University of China in Beijing, said; “Taking up a US stock exchange is in accordance with the national strategy that encourages companies to go global, but controversially, it is indeed capital outflow...furthermore, the bourse business is not related to the core business of the acquirer.”