Zhong Guo,
So China Construction Bank is going IPO today right here in the HKSE making it the biggest initial public offering in the world this year and probably for the last four years . 8 billion dollars could be raised if the stocks sell to expectations. Which means it makes a lot of people very rich.
But here is what I am wondering, where does the money go? Who is in charge of banks in China? Do the management get jobs like everyone else as in they applied or does it go to good staunch communist party members? How much of it will go to the government? How does "Government Owned" companies work when they are going outside to places like Hong Kong to participate the market economy? And really what is the social and political impact of this?
I have zero proof, (no leaks, no pretending there is a source, I really thought of this all by myself so please don’t misquote me) I always thought the profit Xin Hua News Agency made from the NASDAQ IPO of China Internet Corporation, NASDAQ: CHI must have helped fund the great firewall. Otherwise where would my government get all that money to give to Cisco, Microsoft, Nortell to build such a complex system of filters and blocking systems? Isn’t that what China dot com was for: To create a Government owned, approved, and monitored portal for the greater China in an era when the Chinese Internet experience was more or less a giant intranet within the country? (That you can quote me on because I was a producer in the company).
I really have no personal comments on what socio-political impact of a Chinese bank IPO is, nor how the changes in the financial business in China would affect the economy but with that kind of infusion of money there must be some. What would that be?
Discuss?
China CCB’s share sale seen spurring reform
Yan Sham-Shackleton Online 
The IPO will give the bank money for internal and global expansion.
Where would the government get the money to build the Great Firewall? High income taxes and the trade surplus amongst other places …
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I’m not sure about the preconception behind your question. Do you view the state owned apparatus as being part of some monolithic political-industrial complex. Isn’t that going down the conspiracy theory route?
Doing a quick five minutes of browsing I looked up the rules governing listings on the Hong Kong Stock Exchange http://www.hkex.com.hk/rule/listrules/MB%20Chapter%202%20(E).pdf
Here’s an excerpt:
General Principles
2.03 The Exchange Listing Rules reflect currently acceptable standards in the market place and are designed to ensure that investors have and can maintain confidence in the market and in particular that:—
(1) applicants are suitable for listing;
(2) the issue and marketing of securities is conducted in a fair and orderly manner and
that potential investors are given sufficient information to enable them to make a properly informed assessment of an issuer and, in the case of a guaranteed issue, the guarantor and of the securities for which listing is sought;
(3) investors and the public are kept fully informed by listed issuers and, in the case of a guaranteed issue, the guarantors of all factors which might affect their interests —
and in particular that immediate disclosure is made of any information which might
reasonably be expected to have a material effect on market activity in, and the prices
of, listed securities;
(4) all holders of listed securities are treated fairly and equally;
(5) directors of a listed issuer act in the interests of its shareholders as a whole – particularly where the public represents only a minority of the shareholders
I think points 4 and 5 make it clear, along with the internationally accepted accounting rules that will have to be followed, that the proceeds of the IPO belong to the CCB, which is accountable to the market.
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I think the issue is non performing loans, which have nearly trebled in recent months, making investing in state owned Chinese banks a risky proposition.
And I don’t think the IPO is today. It’s only the registration period.
Listen, the booking is overpriced. This may look political, but I think it’s just stupid media hype about an overvalued stock.
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the registration ends wednesday and listing occurs on october 27
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You know I was thinking about this the other day. My friend was telling me how China has a serious problem collecting taxes from entrepreneurs, etc. But, this isn’t a problem with partially state owned enterprises. Because the CCP can loot them for cash, since the party is in control of the enterprises.
One of the things that did in the Soviet Union was that the party could never get a good source of hard currency, i.e.dollars. Mostly they sold raw materials. China has done something very smart, in that they’ve created the facade of “capitalism” while maintaining government control over enterprises. The net result is that the party has a good source of hard currency, without having to create a developed tax system internally.
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Tim
The problem with that argument is that the flow of funds has been from the party, via the banks to the SOEs as China seeks to build its 40 to 50 ‘national champions’ while providing some kind of socio-economic stability to the country. The evidence for this has been the non performing loans mentioned above. In fact, its my recollection that China moved a sizeble quantity of its foreign reserves over to recapitalise the banking section which is probably what has made this listing possible. Look at the huge budget deficit that the country has been running. One of the reasons that land has been such a contentious issue is that there is a construction boom going on. There is so much overinvestment going on that some SOEs have resorted to trying to buy their way out of the Chinese market by going overseas, step forward Haier and Lenovo. Some of the SOEs have reformed themselves and become successful but the China success story has been built on an investment driven boom, not a consumer driven effort.
I’m sure that China has a problem collecting taxes and there is an easy explanation for that – corruption.
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