ICBC targets Hong Kong IPO this year

    China's Big Four major commercial banks are again shaking the market.

    Only seven months ago, China Construction Bank landed on the Hong Kong stock exchange with an initial public offering (IPO) of US$9.2 billion, the biggest IPO of a bank at that stage.

    Now Bank of China is coming with a US$9.7 billion offering, the biggest IPO worldwide since 2000.

    The record may be broken soon by the impending listing of the Industrial and Commercial Bank of China, the largest of the four. And the Agricultural Bank of China is also lining up.

    But the listings story is not just about size.

    Turning the previously wholly State-owned banks into public ones was itself a brave decision three years ago.

    Controlling more than half of the total banking assets in China, the Big Four had been resting on government support. Incomparable networks, strong fiscal backup and close links with top-layer corporations have all helped create a cosy environment for the four, in which market competition did not seem to matter so much.

    But the tide of economic reform and China's entry to the World Trade Organization have swept the country, bringing changes that each commercialized business must grapple with if they want to stay.

    With many of the State-owned enterprises shifting to joint-stock companies with market-driven strategies, banks have also been urged to provide more professional services to modern enterprises and to improve their risk management and governance.

    As stated by the industry watchdog, the China Banking Regulatory Commission, last year, the purpose of reforming the Big Four is to transform the traditional banking businesses to modern enterprises with rich capital adequacy, sound internal control, good service and solid performance.

    On one hand it will free the government from endless investment that may not produce rewarding yields. On the other, it will make the banks more internationally competitive as China further opens up to foreign investors and more domestic companies go out.

    Gradually the four are moving towards that goal in a similar order, which the authorities helped design: Financial restructuring (with capital injection to digest the bad loans); corporate governance reform (forming joint-stock companies); and listing on the capital market.

    But that is just the beginning. Next they have to undergo the test of the public, particularly investors, both at home and abroad, by themselves, with their performance as the only convincing proof of their strength.

    (Source: China Daily)