Elite Chinese Politics and Political Economy

Man, I was not going to write a blog on this, but it is simply too ludicrous. So, CCB wants to list in Shanghai, great. Among the chosen underwriters, CINDA ASSET MANAGEMENT COMPANY!!! If only readers out there know as much about AMCs as I do (and some of you know much more!), you would know how ridiculous such an idea is, especially at the local level. But the MOF, which "owns" the AMCs, wants to turn them into comprehensive financial conglomerates, so CCB (through Huijin) was pressured into picking Cinda as one of the underwriters. As the article intimates, many people are pretty pissed off about that, especially the veterans in the CSRC. Well, I guess Cinda needs "practice" for its future role as an investment bank. Alright, I'll tell you what this whole thing is really about. Basically, MOF officials have been jealous for years that they don't have lucrative mid-career breaks that many in CSRC, CBRC, CIRC, and PBOC have enjoyed for years. Officials in these agencies have routinely rotated to board or manager positions in banks and securities companies, which pay much higher than civil service salaries. Some stay, while others return to the government much richer. Meanwhile, poor MOF officials don't have these opportunities and cannot even afford those pricey Beijing apartments. Solution: let's form a bunch of "investment banks" so that our guys can circulate through them in mid-career....well, who am I to judge. It is "working" well for the PBOC and CSRC.

Top IPO Market: China?

It's Possible as CCB
Sets Shanghai Debut;
U.S. May Be Eclipsed



By RICK CAREW
August 9, 2007

BEIJING -- China Construction Bank Corp. hired three domestic underwriters for its expected $6.5 billion Shanghai initial public offering, a person close to the deal said, putting China on track to challenge the U.S. as the largest IPO market this year.

The Chinese state bank mandated China International Capital Corp., Citic Securities Co. and China Cinda Asset Management Corp. to underwrite the sale of as many as nine billion Class A shares, the person said, as the lender prepares to list shares in the coming months.

The offering by China Construction Bank, which piloted China's listing of its Big Four banks by selling $9.2 billion in shares in Hong Kong in October 2005, is another sign of the growing importance of China's domestic capital markets globally.

Chinese issuers raised $24.2 billion from January to July this year via IPOs, accounting for 13.8% of global IPO proceeds and second only to the U.S.'s $26.9 billion over the same period, according to data from Thomson Financial. Of the total issued by Chinese firms, $20.6 billion was raised in the domestic Class A-share market.

China could surpass the U.S. in coming months as a string of large IPOs, including oil firm PetroChina Co. and coal producer China Shenhua Energy Co., are slated for this year.

China Construction Bank's offering could top rival Industrial & Commercial Bank of China Ltd.'s $5.9 billion sale of Class A shares in October last year for the largest domestic offering to date. Bank of America Corp.'s 8.52% stake in China Construction Bank likely will be diluted by the offering.

While the bank's selection of CICC and Citic Securities, considered top-tier domestic investment banks, to underwrite the sale was expected, its choice of Cinda was a surprise. The asset-management firm, which has specialized in handling nonperforming loans and hasn't underwritten a large IPO before, could get a boost in its ambition to become more active in the securities industry.

Cinda's selection may be due to its close historical ties to China Construction Bank. Cinda was created in 1999 to dispose of China Construction Bank's nonperforming loans.

The person close to the deal said it is possible Cinda could be dropped from the IPO because China has strict securities regulations on related parties underwriting IPOs.

Write to Rick Carew at rick.carew@dowjones.com