Now this is interesting:
China Construction Bank hopes to raise more than $7 billion in its initial public offering – or IPO – this month. If it meets this target, the IPO will be the world’s largest this year.
Stock analysts say China Construction Bank’s IPO will be a litmus test for other big Chinese banks waiting to list overseas.
Chinese banks are struggling with billions of dollars in bad loans to state-run enterprises. But the government recently injected billions of dollars into state-owned banks to improve their financial standing, among them China Construction Bank.
The bank has since managed to reduce bad loans from 17 percent of total loans at the end of 2002 to four percent.
Ken Yau, a bank analyst at Core Pacific Yamaichi Securities in Hong Kong, says this has improved the prospects for China Construction Bank.
“In the past they were troubled by historical bad loans, but now since the government paid its bill, they have a fresh start to try to be profitable on their own,” said Mr. Yau.
Despite the industry’s financial troubles, foreign companies have been buying stakes in Chinese banks ahead of full market liberalization.
In recent months, the Singapore government’s investment arm, Temasek Holdings has invested $1 billion in China Construction Bank, while Bank of America has acquired a $2.5 billion stake in the bank.
Presumably this action is part of the satisfaction of the terms of China’s membership in the World Trade Organization.
I think I’m beginning to become a little confused by all of this. The Chinese are buying U. S. Treasury notes out of one pocket and taking money from U. S. banks and other investors for shares in the Chinese state-owned banks and putting it in the other pocket. So U. S. banks will be financing the Chinese ownership of U. S. government debt? Perhaps some clever bank-ologist can explain it all to me.
