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IN EARLY 2006, Citi made a classic China error: entered into in haste, repented at leisure. In tandem with a clutch of investors including Credit Suisse, Japan’s Aozora Bank and hedge funds Income Partners, Citadel Investment Group and PMA Investment Advisers, the US banking group cobbled together a $160 million loan for one of mainland China’s fastest-growing industrial firms, FerroChina.
Based in eastern Jiangsu province and listed in Singapore, FerroChina had jumped from nowhere to become, by the start of 2007, the world’s largest maker of galvanized steel. Citi and its partners were only too glad to provide the cash: foreign investors were desperate to pump money into and profit from China’s red-hot markets. FerroChina was equally...
