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BEIJING (Reuters) – China Development Bank CHDB.UL, a powerful, state-owned Chinese bank, said on Thursday it will review its strategic tie-up with Barclays Plc (BARC.L), including its equity stake in the British bank after more than two years in a low-profile relationship.

Deals  |  China

In July 2007, China Development Bank (CDB), which used to be one of China’s three policy lenders directly led by the cabinet and is now transformed into a commercial lender, spent 2.2 billion euros on a 3 percent stake in Barclays, partly to help the UK bank finance its bid for ABN AMRO at that time.

ABN AMRO was eventually bought by Royal Bank of Scotland Group PLC (RBS.L), while CDB decided to keep its stake in Barclays as the Chinese bank hoped the tie-up could help it expand abroad quickly.

More than two years on, however, not much has happened between the two banks.

“We are now reviewing our ties with Barclays,” CDB President Jiang Chaoliang told Reuters on the sidelines of the Chinese People’s Political Consultative Conference (CPPCC) in Beijing.

“A review report will be submitted to board members for consideration,” said Jiang, a delegate to the CPPCC, the top political advisory body to the Chinese government.

Jiang acknowledged business cooperation between the two banks had been less productive than expected in the past two years, due partly to the global financial crisis, which forced Barclays to put more effort on its organic growth at home.

When asked if CDB might sell off or reduce its stake in Barclays after the review, Jiang replied: “All options will be discussed and considered in the reviewing process.”

CDB currently holds a 2.07 percent stake in Barclays.

BOARD MEETING IN JUNE

Jiang is well known in the UK financial industry for his tough negotiations with John Bond for HSBC’s (HSBA.L) (0005.HK) nearly 20 percent stake in late 2004 in Bank of Communications (3328.HK) (601328.SS), China’s No. 5 bank, when Jiang and Bond were both top bosses of the two lenders.

In 2008, Jiang resigned from Shanghai-based Bank of Communications for his new post as CDB president in Beijing.

Jiang said CDB’s board would meet in June to discuss both the bank’s equity investment in Barclays as well as their strategic cooperation.

“I believe Barclays is still interested to cooperate with us and we will see what we can continue to do in the future after the review,” he said.

The relationship between CDB and Barclays has been a focus in the public and media since Barclays did not manage to acquire ABN, which later became a heavy financial burden for RBS.

Some UK fund managers and analysts have also raised concerns about CDB’s strong political connections with Beijing. CDB was established as a policy bank to support many major domestic infrastructure projects.

In July 2008, the State Council, China’s cabinet, rejected a plan by CDB to increase its stake in Barclays due mainly to risk concerns, influential Chinese magazine Caijing reported.

Since then, little information has been announced to the public about cooperation between the two banks, which have said they planned to jointly explore business opportunities in areas such as international trade and commodities derivatives.