On 2 Jun, journalists learned from the Inner Mongolia branch of China Construction Bank (CCB) that it will sell its 5.63% stake in Baogang Iron & Steel (Group) Co., Ltd.

CCB holds a 5.63% stake in Baogang Iron & Steel (Group) Co., Ltd, obtained in exchange for a previous RMB 830 mln loan. The shares were entrusted to China Cinda Asset Management Corporation, and CCB wanted to transfer the shares to qualified domestic companies.

Baogang Group is a metal smelting company based in Inner Mongolia. It provides the widest range of products in its industry in China. Its main products include steel and iron, shaped materials, and rare-earth by-products. Baiyunebo Iron Mine, part of the Baogang Group, has the largest rare-earth and the second-largest niobium reserves in the world. Both the acquisition and the stake transfer in Baogang group were not brought on by CCB. As Baogang Group failed to pay back loans to CCB, these debts were converted to a certain number of shares of Baogang Group. Meanwhile, as China’s steel industry is growing healthily, CCB is also reluctant to distribute the shares. Nevertheless, regulatory authorities have prohibited banks from making long-term investment in industrial companies.

Source: Shanghai Securities News

Date: 3 Jun 2008

CN01/SW/MM/KM