CICC: China’s internationalization remains a historic opportunity

Cross-border capital flows remain an essential part of China’s economic development, according to Dr. Chu Gang, CICC’s chief operating officer. As one of China’s leading investment banks, CICC bridges China with the world by promoting China’s economic reforms and providing best-in-class services to clients at home and abroad. Chu wants CICC to drive long-term partnership and tell China’s story to the world.

As the world’s second largest, China’s economy has exceeded RMB 100 trillion and become an important engine of global growth. Over the past two decades, China has continued to advance reforms and accelerated the opening of its capital markets, which have created opportunities for cross-border business and capital growth. For Chinese investment banks, including CICC, this liberalization is too important to be derailed by short-term volatility.

“Internationalization will remain our top priority throughout the next decade,” said Dr. Chu Gang, chief operating officer of CICC. Despite the increasingly complex challenges faced by any multinational company, Chu expects CICC to strengthen its advantages in international business and play a more active role in the cross-border flow of capital.

 

Facing resistance to globalization

Resurgent skepticism of globalization is a headwind for international expansion. The global macro environment has shifted dramatically, spurring increases in instability and uncertainty. However, Chu believes that promoting the efficient flow of capital and facilitating trade for clients are still in line with the vital interests of various economies — a view that remains the consensus of most countries.

“China is still an attractive option to global investors thanks to the size of its economy and the accessibility of its market,” said Chu. “CICC is committed to increasing investment in its international business and taking actions to promote economic and financial globalization.”

According to data compiled by Bloomberg, international investors owned 4.8% of the free float in China’s onshore stock market at the end of Q1, 2022. Foreign investors also held about RMB 4 trillion of Chinese bonds, or 2.9% of the total China onshore bond market.

Despite the short-term impact of a volatile global macroeconomy on cross-border capital flows, “in the long term, China’s announced carbon neutrality target and the sustainable growth model will lead to a boom in industrial structure upgrading and technological innovations, which will make the Chinese economy more resilient and make Chinese assets an asset class that global investors cannot afford to ignore,” said Chu. The expansion of Bond Connect and other trading links will also encourage more foreign investment across multiple asset classes, including equities, bonds and alternative assets.

 

Focusing on international business

This clear focus on internationalization has been an important driver of business growth for CICC. In 2021, CICC achieved a year-on-year increase of about 50% in net profit, making it one of the top-performing Chinese securities houses. The company’s return-on-equity (ROE), which is a core metric to measure the profitability of investment banks, reached 14.64% in 2021 — a market-leading position in China, and comparable to many top international investment banks.

According to data compiled by Bloomberg, CICC topped the rankings of equity financing for Chinese companies globally in 2021, as well as in the underwriting of Chinese U.S. dollar bonds and M&A transactions involving Chinese companies. CICC’s research team has been named as #1 by Institutional Investor magazine for Chinese research and sales for 10 consecutive years.

CICC is a leader in Hong Kong’s IPO market. According to Bloomberg’s data, CICC topped the Hong Kong IPO ranking in 2021 with an underwriting amount of US$4.02 billion, gaining a market share of 9.36 percent. Serving as the sole sponsor and global coordinator, CICC supported yacht maker Ferretti’s IPO in Hong Kong, the first Hong Kong listing from an Italian company in a decade.

 

Riding the two-way opportunity

For CICC, helping China go global is just as important as bringing in international capital. Outbound capital flows also have a lot of room to grow, especially as Chinese companies invest in major infrastructure projects overseas and domestic investors look to diversify their portfolios.

CICC was established in 1995 with China Construction Bank and Morgan Stanley as its founding shareholders. It is the first investment bank in China conducting cross-border business and is dual listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange. Since 1997, CICC has established operations in major international financial centers around the world, forming a network between its Hong Kong hub and offices in New York, San Francisco, London, Frankfurt, Singapore and Tokyo.

“CICC will further expand our footprint into more developed markets and emerging markets, including countries involved in the Belt and Road Initiative, aiming to explore new growth opportunities,” said Chu.

CICC currently serves about 4,000 international institutional clients, offering support including stock brokerage, investment banking, fixed income, private equity investment, asset management and wealth management. The scale of its international business has grown rapidly in recent years. In 2021, CICC helped PRC-based enterprises access overseas financing of nearly US$120 billion.

Chu is now focusing on offshore team-building and development. “We are embracing diversified cultural integration and creating an international working atmosphere.” He said, “We hope to attract more overseas financial talent.”

In addition, CICC is also exploring possibilities, such as strategic mergers and acquisitions and joint ventures as part of its international expansion strategy. “We are looking forward to working with strategic partners with complementary advantages to enhance our service capabilities to global clients,” Chu said.

Chu sees the opening up of China’s financial markets as a “major historic opportunity” that has shaped CICC’s strategy since its foundation.