Chinese Bank In Talks Over Hong Kong Joint Investment Bank Venture

by Mary Swire, Tax-News.com, Hong Kong

10 September 2001

The Chairman and President of the Industrial and Commercial Bank of China (ICBC), Jiang Jianqing, has confirmed that the bank is discussing a Hong Kong joint venture to open an investment bank on the Chinese mainland with other US and European investment banks.

According to Mr Jiang, the bank is aiming to recruit a foreign partner to assume a stake in its majority-owned Industrial and Commercial East Asia Finance Holdings (ICEA) before the end of this year. He said: 'Our next step is to seek a co-operation with one of the world's largest investment banks to make ICEA one of the most outstanding investment banks in China.'

Based in Beijing, ICBC is one of the leading four banks in China. Chinese banking laws prohibit ICBC from opening an investment bank on the mainland but it is expected that the bank will seek a licence via its Hong Kong joint venture. The move follows in the footsteps of the China International Capital Corporation in which Morgan Stanley International acquired a 35 per cent stake and has gained great success underwriting Chinese initial public offerings outside of the mainland.

ICBC is well established in lending cash to state-owned enterprises but in recent years has branched out into mortgages and personal loans which have become increasingly popular, representing around 8 per cent of the bank's total lending services. 'Three years ago this figure was less than one per cent,' said Mr Jiang.

Recently, however, the People's Bank of China calculated that non-performing loans in the four major state banks were 25% of the total. The Bank of China estimated that its figure was 28.8% per cent and Mr Jiang said that ICBC expects its level to be 30% per cent. He said an official announcement confirming the percentage would be released by the end of the year.

Referring to ICBC's glass-fronted headquarters in Beijing, Mr Jiang claimed: 'We plan to open up two of our branches to international accounting firms for them to make a report. It is my hope that our accounts will be as transparent as our building.'

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