Industrial and Commercial Bank of China
Why did ICBC feel it was necessary to issue equity in markets outside of China?
ICBC felt it was necessary to issue equity in markets outside of China to raise their capital, to list their IPO shares on Shanghai stock exchange and the Hong Kong exchange (Hill, 2011). The reason why they list shares was because of the strict reporting and governance standards, this would send a message to potential investors. By issuing equity share, ICBC hopes Chinese companies not only to raise cash, but to improve corporate governance and transparency, and to bring global recognition (Hill, 2011).
What are the advantages of such a move?
By listing in international markets, ICBC would be able to have a large pool of investors. It will open ICBC to scrutiny from other countries. Another advantage for ICBC in both domestically and globally, the intense market competition would involve financial innovations and a diverse market. ICBC would transform their operations and business innovations. It would strengthen the competitiveness of its service. There would be new advantages in the future (ICBC, 2013).
Can you see any disadvantages?
The only thing that could happen is that countries do not agree on how ICBC operates. The credit staff tends to focus only on checking whether or not if the client has received the environmental permit from the relevant authorities. Another disadvantage is the quality of current environmental impact assessments. They may not have the appropriate skills to conduct qualified environmental impact assessments. There are always potential risks involved (Emtairah, T., Hansson, L., & Guo, H., 2005). Many observe that the disadvantage relative to other host countries. Personally speaking, there will always be weaknesses no matter what. There can be some businesses or people who may not like the way things are being handled.
What are the attractions of the ICBC listing to foreign investors?
The ICBC listing is a great success. Foreign investors were attracted to ICBC listing because it gave them a piece of China's growing economy. ICBC is one of the largest banks in China, was an attractive option. The attraction for foreign investors is mostly due to the huge market and cheap labor. Hong Kong and Taiwan made a key contribution in the growth and the volume of FDI inflows. China's wage rate is lower than any developed countries, but it also may many developing countries. The cheap labor is well trained, quite productive, and can be supplied in an unlimited amount. ICBC being a huge market and cheap labor constitute China's double attraction to foreign investors (Emtairah, T., Hansson, L., & Guo, H., 2005). ICBC listing attracted considerable interest from foreign investors, who saw it was a way to invest in the Chinese economy (Hill, 2011).
What do you think are the risks for a foreigner associated with investing in ICBC?
Investors in ICBC need to be ready to deal with foreign exchange risk and any other risk that is associated with foreign investments. Hong Kong exchange has strict transparency requirements (Hill, 2011). ICBC has made efforts to reassure investors that the operation is above board. They will suggest that investors will still have some level of risk because they have invested in a foreign company from a country that is governed under different regulations. Overall it does not matter if what country you are in there would always be some kind of risks.
Emtairah, T., Hansson, L., & Guo, H. (2005). Environmental challenges and opportunities for banks in china: The case of industrial and commercial bank of china. . Greener Management International, (50), 85-95. . Retrieved from http://search.proquest.com/docview/211483107?accountid=32521
Hill, M. (2011). International Business (8th ed.). McGraw-Hill
ICBC. (2013). Retrieved from http://icbc.com.cn/ICBC/sy/
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