China wants reports on financial health of foreign JVs

11 October 2008

To safeguard its investors from the global financial crisis the securities regulator China Securities Regulatory Commission has asked all local venture fund companies operating in mainland China and Hong Kong who have joint ventures with foreign firms to disclose the financial health of their foreign partners and provide information on how the current global financial crisis may affect them.

In an e-mail to all venture fund companies, Hong Kong-based banks, hedge funds and private equity houses, the regulator has asked for a detailed report via e-mail by this month on how their foreign partners have been affected by the financial crisis and how the crisi could impact the local joint ventures. It has also asked them to file confidential "audits".

China fears that investors and the public could panic button if any one company were to fall due to the ongoing financial disaster as three major foreign financial institutions, US insurer AIG, European banks Fortis and Societe Generale, caught up in the financial messes, have venture fund JVs with Chinese companies.

According to media reports, AIG is looking for buyers for the huge 'Shanghai Centre complex' situated in the prominent business district on West Nanjing Road in order to raise funds. AIG was bailed out by the US Federal Reserve, which enlarged its two-year $85 billion loan to $122.8 billion witha an additional $37.8-billion infusion. (See: $85-billion bailout for AIG  and Fed pumps another $37.8 billion in AIG) 

Belgian-Dutch banking giant Fortis, which was on the verge of a collapse, was rescued by the governments of Belgium, Netherlands and Luxembourg (Benelux) agreeing to a partial nationalisation and pumping $16.37 billion into the bank. (See: Benelux governments inject €11.2 billion to save Fortis) 

The fear was heightened when Asian stock markets recorded their biggest fall in 20 years and Singapore, with the best economy in Asia, falling into recession with its market falling more than 6.6 per cent yesterday.