CICC: Where China meets the world

Wang Qishan: CICC’s first chairman set it on the path to being the most international Chinese investment bank

In the mid-to-late 1990s, China’s regulators encouraged the country’s best state-owned enterprises (SOEs) to list in Hong Kong. The hope was that they could bring back international market practices and disclosure standards. As a joint venture between China Construction Bank and Morgan Stanley, CICC had a natural advantage in leading that effort.

Wang Qishan, now one of the country’s vice-presidents, was the first chairman of the firm. He immediately got to work turning CICC into an institution that married the culture and ambition of a US investment bank with the connections and local knowhow of the best Chinese firms.

CICC acted as the lead sponsor of China Telecom’s IPO on the Hong Kong Stock Exchange in 1997, the first overseas IPO by a Chinese state-owned enterprise.

It followed that with a series of other landmark IPOs for Chinese state-owned enterprises including China Unicom, Sinopec, PetroChina and China Life Insurance Company. It also worked on the IPOs of three of China’s big four banks: Agricultural Bank of China, China Construction Bank and Industrial and Commercial Bank of China.

CICC always seemed to be there when China was pushing through market reforms. It sponsored the domestic listing of Baosteel in 2000, the first onshore Chinese listing that was priced by the market, not regulators. It also advised on China Mobile’s acquisition of Pakistan-based Paktel in 2007, China’s first cross-border merger and acquisition deal.

“Initially, our clients were mainly big SOEs, and their primary demand was for us to help restructure themselves so as to get listed in overseas markets,” Xu Yicheng, head of strategic development at CICC, told Asiamoney in June.

But with the decline in the volume of offshore equity deals by Chinese SOEs after 2010, CICC had to find new clients and revamp its business model. CICC now has a much broader client base, including both private and state-owned enterprises. Its international background gives CICC a unique advantage in business that connects China to the world.

The firm frequently appears in the top five bookrunners on the Asia Pacific equity capital markets league tables, underwriting 48 deals worth a total of $7.53 billion so far this year. The proportion of overseas business income in its ECM business exceeded 50% for the first time in 2018.

CICC also sponsored nine A-share IPOs worth a total of Rmb36.2 billion ($5.1 billion) in 2018, a 253% increase in volumes from the previous year, ranking first in the market. It has sponsored nine Hong Kong IPOs and underwritten five US IPOs of China-based companies, maintaining a strong position in both markets.

It is one of the top sponsors of the newly opened Star board, the fruit of the Chinese government’s latest landmark market reform measures. The board, which sits under the Shanghai Stock Exchange, is the country’s first registration-based and market-priced stock board. It is China’s attempt to create a rival to the Nasdaq exchange.

CICC sponsored China Railway Signal and Communication’s listing on the bourse, the first state-owned enterprise to be listed and the largest IPO on the new board. It is also sponsoring CR Microelectronics, one of the two offshore-registered listees. That deal had still not priced in early September.

In 2018, CICC’s UK arm became one of the first cross-border Global Depository Receipts (GDRs) conversion institutions for Chinese companies who want to list on the London Stock Exchange. This means the firm is able to sponsor Chinese companies who wish to list their shares as GDRs on the exchange.

It seems set to keep its status as the most international Chinese investment bank. Approximately 55% of its managing directors and 65% of senior management had overseas education or work experience. More than 40% of its employees hold a master or higher degrees.

The firm is still making serious efforts to grow its business. CICC bought 100% of the shares of China Investment Securities Co. (CISC) in 2017. The goal is to transform CISC, a Chinese investment bank and brokerage firm, into CICC’s wealth management arm, a market where it sees great potential. China’s household wealth continued to surge in 2018 and the proportion of financial assets in Chinese investors’ portfolios is still tiny compared with the US and Europe.

CICC may have had a headstart over its rivals in the earliest days of China’s market-opening, but that was never going to be a lasting advantage. The firm still needs to fight every day to win business from its rivals. But CICC has proved it is willing to take on those fights – and is likely to win.