This from the Economist on Texas Pacific Group's exit from a Shenzhen Development Bank:

BACK in 2004, when China was more convinced that the West had something to offer its financial system, TPG, an American private-equity firm, was permitted to bypass the country’s restrictive regulations and buy a controlling 17% stake in a publicly traded basket case called Shenzhen Development Bank (SDB). The news, on June 12th, that TPG is to sell its stake to Ping An, a large Chinese insurer, draws another line under that era.

SDB was the first bank to list on Shenzhen’s stock exchange, and in the craze that followed the shareholder list swelled to more than 600,000 individuals. But by the time of TPG’s purchase, it was in a sorry state. Disclosed non-performing loans accounted for 14% of loans; the actual amount was undoubtedly much higher.

SDB did, however, have several assets that in the Chinese context were almost priceless: a national banking licence and more than 260 branches covering almost all of the country. The potential for a banking collapse was enough for the Chinese authorities to waive rules barring foreign control, foreign management and foreign purchases of domestic shares. The potential in China’s embryonic banking market was enough for TPG to take a chance.

In the aftermath of the acquisition performance improved, as did SDB’s share price. But there were limits on further progress. Writing off bad loans, building systems and extending more credit requires capital, but SDB’s various efforts to raise funds could not get past China’s regulators. This is unlikely to be a problem for Ping An, which is well-treated at home but found itself lost abroad after a calamitous recent investment in Fortis, a now-dismantled European bank. In theory Ping An has the resources to address SDB’s capital needs, and could pair its domestic insurance franchise with SDB’s national banking reach.

For TPG, being seen to have rehabilitated a bank and successfully passed it on could open doors for future deals that China’s increasingly xenophobic regulators would be otherwise unlikely to approve. After a disastrous investment in Washington Mutual, a failed American bank, TPG was also doubtless under pressure to show some gains for investors. Although the terms are complex and not fully public, TPG put less than $300m into SDB (perhaps much less) and will take out more than $1.6 billion (perhaps much more).

The size of TPG’s returns has prompted reports that the deal may be blocked by officials. No private-equity firm likes having its exit strategy undermined but this would be no disaster. Barring another round of banking failures, no foreign firm will be granted a similar franchise in China for years to come. Even with strings attached, TPG would be hard-pressed to find a more interesting place for its money.