China May Scuttle $2B Citigroup Bailout

On the eve of Citigroup’s fourth-quarter earnings announcement, the Chinese government appears to have raised objections to China Development Bank's purchase of a $2 billion stake in the struggling financial giant, reports the Wall Street Journal. The proposed deal, reported by the Journal over the weekend, is part of an $8-billion to $10-billion infusion Citi has been trying to put together from a number of foreign investors.

Citi hopes to offset its earning report tomorrow—expected to contain a large dose of additional subprime writeoffs—with news of a lifeline from these investors to stabilize its capital base. US banks have looked to China several times for bailouts, most recently a $5-billion investment in Morgan Stanley by China Investment Corp. (More Citigroup stories.)