China Development Bank's plan to bid for Germany's Dresdner Bank failed in large part because Chinese leaders refused to sign off on the deal in time in a sign of Beijing's increasingly cautious attitude to investments in western financial institutions.

The hesitance of China's State Council to approve a potential $10bn bid for a majority stake in Dresdner is another sign of Beijing's new caution following a flurry of investments in western counterparts last year, most of which have fallen in value. The Chinese government has not approved any major Chinese offshore investment in a financial firm so far this year.

CDB began working in January on an offer to buy a controlling stake of roughly 50 per cent in Dresdner for about $10bn from Allianz, the German insurer. But CDB was never able to submit a formal bid and Allianz over the weekend agreed to sell Dresdner to German rival Commerzbank.