ICBC ad­justs ser­vices for ex­pand­ing firms

China Daily (USA) - - BUSINESS - By JIANG XUEQING jiangx­ue­qing@ chi­nadaily.com.cn

China’s largest State-owned com­mer­cial bank, by as­sets, is ad­just­ing its fi­nan­cial ser­vices, as Chi­nese com­pa­nies ex­pand­ing their busi­ness abroad go through a tran­si­tion from ac­qui­si­tions of nat­u­ral re­sources to tech­nol­ogy ad­vance­ment and in­dus­trial up­grad­ing in more di­ver­si­fied coun­tries.

Since the be­gin­ning of 2016, most of the Chi­nese com­pa­nies go­ing global that are sup­ported by the In­dus­trial and Com­mer­cial Bank of China Ltd have come from high-tech and strate­gic emerg­ing in­dus­tries. Sta­tis­tics from the ICBC show that in­for­ma­tion tech­nol­ogy, high­end con­sump­tion and in­dus­trial sec­tors ac­counted for 66 per­cent of the num­ber of deals for cross-bor­der M&A con­ducted via the bank.

“As China has en­tered the stage of mod­er­ate-speed growth, Chi­nese com­pa­nies are trans­form­ing from scale ex­pan­sion to qual­ity en­hance­ment and break­through in­no­va­tion. Their de­mands for high-end tech­nolo­gies, ad­vanced prod­ucts, core patents and ripe man­age­ment ex­pe­ri­ence keep in­creas­ing along with the de­mands for over­seas as­set al­lo­ca­tion and the in­te­gra­tion of up­stream and down­stream in­dus­try chains,” said Li Feng, gen­eral man­ager of the ICBC’s in­vest­ment bank­ing depart­ment.

To ad­just to the changes in the theme and des­ti­na­tions of Chi­nese com­pa­nies go­ing global, theICBCnow­pro­vides in­vest­ment bank­ing ser­vices in­clud­ing deal mak­ing, due dili­gence in­ves­ti­ga­tions and post-merger in­te­gra­tion through a broad client base in and out­side China. The bank also of­fers lo­cal­ized com­mer­cial bank­ing ser­vices, such as debt re­struc­tur­ing, global cash man­age­ment and set­tle­ment, via its branches in the host coun­try of a takeover bid.

On top of this, it pro­vides mul­ti­ple fi­nanc­ing port­fo­lio so­lu­tions in­clud­ing M&A loans, eq­uity in­vest­ment and the in­tro­duc­tion of strate­gic in­vestors to help the clients com­plete cross-bor­der ac­qui­si­tions and ef­fec­tively con­trol their fi­nanc­ing costs, Li said.

The ICBC has built a strong team of an­a­lysts to is­sue pre­views on cross-bor­der M&A and con­duct re­search on ma­jor in­dus­tries, na­tional poli­cies and coun­try risk. When China’s cen­tral bank makes fre­quent ad­just­ments to win­dow guid­ance — an in­stru­ment of mone­tary pol­icy — on cap­i­tal flows, the bank will de­sign proper trans­ac­tion struc­tures and fi­nanc­ing so­lu­tions for the client based on the judg­ment of its re­searchers.

In the first half of 2016, the num­ber of China’s over­seas M&A deals in the sec­tors in­clud­ing tech­nol­ogy, me­dia and telecom­mu­ni­ca­tions, in­dus­trial prod­ucts, and au­to­mo­bile and trans­porta­tion ac­counted for two-thirds of the to­tal, said Zhang Xinyun, ex­ec­u­tive vice-pres­i­dent of JIC In­vest­ment Co Ltd.

The amount of Chi­nese com­pa­nies’ cross-bor­der M&A reached $79.3 bil­lion in Europe and North Amer­ica last year, dou­bling the amount in 2011. In re­source­ori­ented re­gions like Africa and South Amer­ica, the amount of M&A by Chi­nese com­pa­nies fell 84 per­cent to $2.1 bil­lion.

“It shows thatChi­nese com­pa­nies are in­creas­ingly ea­ger to ac­quire com­pre­hen­sive re­sources, apart from nat­u­ral re­sources, of com­pa­nies in the lead­ing sec­tors of de­vel­oped coun­tries,” Zhang said at a re­cent fo­rum on cross-bor­der ac­qui­si­tions.

An­other trend is that pri­vate com­pa­nies are grad­u­ally tak­ing a lead­ing role in over­seas M&A. Com­pared with State-owned en­ter­prises, pri­vate com­pa­nies lack suf­fi­cient ex­pe­ri­ence in over­seas M&A and are less ca­pa­ble of op­er­a­tional in­te­gra­tion, ac­cord­ing to the ICBC.

“Draw­ing on our strengths in the global net­work and the in­ter­ac­tions be­tween com­mer­cial bank­ing and in­vest­ment bank­ing, we pro­vide var­i­ous fi­nan­cial ser­vices to clients dur­ing the en­tire work flow,” Li said. “By high­light­ing on post-merger syn­ergy of both par­ties and the pos­si­bil­ity of suc­cess­ful in­te­gra­tion, we help the client in­tro­duce strate­gic in­vestors and bal­ance risks and re­turns.”

REUTERS

A man pulls a bag as he walks past a branch of In­dus­trial and Com­mer­cial Bank of China in cen­tral Madrid.

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