Beijing cash behind Ping An stake sale raises eyebrows

More than half of the money that Thailand's Charoen Pokphand (CP) Group plans to spend on acquiring a major stake in Ping An Insurance comes from the central government-controlled China Development Bank (CDB), sources say - an arrangement market experts say is rare.

Last week HSBC announced a plan to sell its entire 15.6 per cent stake in China's second-largest life insurer to CP Group, which is controlled by a Thai-Chinese family well connected to Beijing.

Details were vague. HSBC only said the deal would be closed in two stages - CP would first pay about 20 per cent for the shares with its own cash. The remaining 80 per cent would be paid in a combination of cash and loans sponsored by CDB.

Neither HSBC nor CP disclosed how much money the Thai food exporter needed to borrow from CDB to complete the second-stage transaction.

Sources in the financial industry familiar with the deal told the South China Morning Post that most of the money would come from the mainland bank.

Such an arrangement is widely considered unusual and risky. It raises questions as to why Beijing will allow a foreign investor to borrow so heavily from a state-controlled bank to help it acquire a major stake in a key financial institution.

It appears that CP - which has limited financial business experience - will bring neither capital nor expertise to the table.