CHINA BANKING AND FINANCE NEWSLETTER
Vol. 4, No. 11 - November 19, 2003
TOPICS THIS ISSUE:
- High-tech Tycoons Highlighted In Forbes China Rich List
- Ranking Chinese Economists Call For Further Reforms
- China Insurer Raises $693 Million
- Chinese Banks Need Structural Upgrade
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High-tech Tycoons Highlighted In Forbes China Rich List
The rise of high-tech tycoons is the most significant feature of the 2003 Forbes China Rich List unveiled by the US finance magazine.
William Ding, founder and chief architect of the Chinese Internet company Netease.com Inc, topped the list with wealth of US$1.06 billion based on his holdings' market capitalization on October 13.
Ding, who owns 58.5 per cent in NASDAQ-listed Netease, has seen his stocks rise 20 times last year and almost fivefold this year.
Forbes believes that with the launch of the third generation mobile communications system and the development of the high-tech industry in China, there will be more entrepreneurs from the sector in the Forbes China Rich List, published first in 1995.
Timothy Chan, boss of Shanghai Shanda Networking, ranked sixth with huge gains from online games contributing to his US$490 million.
Charles Zhang, chairman and chief executive officer of another NASDAQ-listed Chinese Internet business, Sohu.com Inc, was 20th on the Forbes list, which was compiled previously by contracted researchers, but this year by the magazine itself.
Russell Flannery, Forbes Global's Shanghai bureau chief, said that another trend reflected this year that more private business people sought overseas capital markets to raise funds.
Among the 100 richest people of China, 41 have overseas-listed subsidiaries, according to Flannery.
The Forbes list also indicates that most of the rich people are located in coastal areas of China, which are more economically affluent than inland regions.
Out of the 100 richest people, 16 are from Guangdong Province, 13 from Shanghai, 10 from East China's Zhejiang Province, and nine from Beijing.
Xu Rongmao, a real-estate tycoon in Hong Kong and Shanghai, Lu Guanqiu from auto parts and finance, and Liu Yonghao from animal feed, finance and real estate, followed Ding and Yung.
Ma Huateng, head of Shenzhen-based instant messaging service provider Tencent.com, and Zhang Kaiyong of Zhongkezhi Group in the finance sector, ranked the 99th with US$100 million each.
Source: China Daily
Ranking Chinese Economists Call For Further Reforms
China's political, governmental and institutional reform should be further deepened as the nation is moving ever forward with market-oriented system, a call voiced by ranking economists and officials in Beijing.
Gao Shangquan, president of the China Society of Economic Reform, was quoted as saying: "Our current political system, mainly resulting from the planned economic system, needs to be further reformed as the country is becoming economically energetic,"
Wu Jinglian, China's renowned economist with the Development and Research Center under the State Council feels that China's economy while achieving an average growth rate of 9 percent over past 25 years, the money is not being used efficiently. "The investment (in China) is huge but inefficient," he stated.
Nevertheless, they hailed China's rapid economic development as a glorious achievement, given the success the country has achieved over the past quarter of a century, according to the newspaper.
Source: Xinhua
China Insurer Raises $693 Million
China's largest property insurer, PICC Property and Casualty Co Ltd, has raised $693 million in an initial public offer that drew massive demand from retail investors.
Hong Kong's biggest IPO so far this year was priced at HK$1.80 a share, the top of an indicated range that had been set at HK$1.60-HK$1.80.
The offer raised HK$5.41 billion ($693.46 million) and gives the firm a market capitalization of about $2.5 billion.
The insurer sold just over three billion shares, or 28 percent of its enlarged share capital, excluding a 15 percent overallotment option.
Another two of China's major insurers are planning to sell at least $4 billion of shares in coming months as Beijing opens up its growing insurance industry and tears down a cradle-to-grave welfare system for its 1.3 billion people.
PICC's initial public offering, sponsored by Morgan Stanley and China International Capital Corp, drew strong interest from investors seeking direct exposure to China's booming economy.
Retail investors in Hong Kong subscribed for about 130 times the number of shares in the public offer, while the institutional tranche of the deal was 15 times covered, the source said.
The retail portion of the share offer will be raised to 50 percent from 10 percent due to the oversubscription.
The huge demand looks likely to guarantee PICC a strong debut when it starts trading on Hong Kong's main board on November 6.
China Life Insurance Co, the country's largest life insurer, is set to follow PICC with a share offering in Hong Kong by the end of this year that could raise about $2 billion.
China's second-largest insurer, Ping An Insurance, is also eyeing an IPO in Hong Kong worth about $2 billion.
PICC dominates China's property and casualty insurance market with a near 70 percent share of premiums. But its market share has been falling in recent years and the trend is likely to continue amid competition, the firm said in its listing document.
PICC plans to use proceeds from the deal to help improve its solvency margin, which fell short of the minimum level required by China's insurance watchdog at the end of last year.
The company won a vote of confidence recently when American International Group, the world's largest insurer by market value, said it would buy a 9.9 percent stake in the firm.
AIG is expected to pay about HK$1.91 billion for the investment before the overallotment option is exercised.
Based on the offer price, PICC sold its IPO shares at about 14.5 times forecast 2003 earnings, and 1.24 times book value for this year.
Insurance Australia Group Ltd, Australia and New Zealand's largest property and casualty insurer, is trading at about 14.2 times expected earnings for the year ending in June 2004, and a price to book multiple of 2.02 times.
PICC expects to earn at least 1.43 billion yuan ($172.71 million) this year, up from just 278 million yuan in 2002, according to its listing document.
The company in its current form was formed in July this year when its parent, formerly known as the People's Insurance Co of China, injected all of its commercial insurance operations into the listing vehicle.
Source: Xinhua
Chinese Banks Need Structural Upgrade
China's State banks are enhancing efforts to map out their listing plans, but experts suggest improving their corporate governance systems should be high on their agendas.
PricewaterhouseCoopers, one of the world's largest professional services organizations, is developing a reform roadmap to be used as a baseline for China's banking reform.
Chinese banks, traditionally intertwined with government departments, face unprecedented changes, especially given China's World Trade Organization (WTO) membership.
That trend is likely to continue as China's market-oriented economy keeps evolving.
The economy's opening to foreign banks, in accordance with China's WTO commitments, is forcing domestic banks to improve their capabilities and address structural problems.
Such problems include high levels of non-performing loans (NPLs), non-commercial structures and staffing.
PricewaterhouseCoopers suggests China's banks must upgrade their board structures, and their effectiveness.
PricewaterhouseCoopers suggests banks must establish boards with sufficient numbers of non-executive directors, who will keep executives in check, to be effective.
Source: China Daily
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