The departure of the core executives such as Zhu Yunlai and Jin Liqun made the declining CICC even more dysfunctional. The "magic weapon" on which the former "China's No. XNUMX Investment Bank" became famous eventually became the source of CICC's decline. The roots of the equity issue in the early years have caused CICC to repeatedly miss the opportunity to fight back. Whether it will be extremely peaceful, or continue to sink, CICC needs a transformation from the inside out.

[Wang Yue/Text] From the "China's No. XNUMX Investment Bank" that swept across the world at that time, to now the core members have left one after another, China International Capital Corporation ("CICC" or "CICC"), a Chinese investment bank The "nobles" of China are declining day by day.

In the first ten years after the establishment of CICC, it was unmatched in China's investment banking industry. Behind the series of achievements of CICC, its unique "uniqueness" makes it possess irreplaceable competitiveness.

In less than 20 years since its establishment, CICC has completed domestic and overseas restructuring, restructuring and initial public offerings of 60 state-owned enterprises. Including Sinopec, PetroChina, China Mobile, China Unicom, PICC, China Life, Construction Bank, Agricultural Bank, Industrial and Commercial Bank and other large state-owned enterprises. CICC has ranked first in the underwriting of overseas listings of Chinese companies for years.

Today, although the brilliance created by CICC is still talked about by the industry, the fate of this investment bank has changed tremendously.

Since October 2014, CICC has issued three consecutive announcements on the resignation of important figures. Chairman Jin Liqun, CEO Zhu Yunlai, and chief economist Peng Wensheng have all voluntarily resigned.

CICC, a mysterious company once regarded by foreign institutions as "a lens of observing China", has once again attracted public attention. Several interviewees told reporters: We all want to know what happened inside CICC?

What does their departure mean?

Established in 1995, CICC is China’s first Sino-foreign joint venture investment bank established by well-known domestic and foreign financial institutions and companies based on strategic partnerships. Its shareholders include: China Construction Bank Investment Co., Ltd., Morgan Stanley (Morgan Stanley), China Investment Guarantee Co., Ltd., Singapore Government Investment Corporation, Ming Li Group Holdings Limited.

In 2008, when CICC's investment banking income began to gradually decrease, Morgan Stanley was troubled by the financial crisis and began planning to sell its 34.3% stake in CICC. This transaction was finally concluded at the end of 2010. It was taken over by well-known American private equity KKR and TPG.

Throughout the history of CICC, many influential figures in the Chinese economy have served or had close relationships with it. These include: Wang Qishan, Zhou Xiaochuan, Zhu Yunlai, Fang Fenglei, Wang Jianxi, Li Jiange, Jin Liqun, Xu Xiaonian, etc.

On October 10th, Zhu Yunlai, the "soul man" who has worked at CICC for 14 years, announced his resignation as CEO of the company. At this time, CICC has not found a suitable successor. The position is temporarily represented by the company's chief operating officer Lin Shoukang. Zhu Yun's whereabouts have not been revealed yet. CICC stated that the company's board of directors is currently selecting a new CEO worldwide.

China International Capital Corporation's equity relationship (Source: China International Capital Corporation's 2013 audit report)

Today, the anti-corruption team headed by Wang Qishan, secretary of the Central Commission for Discipline Inspection, is carrying out the most severe inspection and anti-corruption operation in the country's history. Zhu Yunlai entered CICC under the arrangement of Wang Qishan. Therefore, it is believed that Zhu Yunlai's withdrawal at this time has "avoidance" reasons. In addition, Zhu Yunlai's special status has always been regarded as one of the main obstacles to CICC's overseas IPO.

On the 16th, Jin Liqun, chairman of CICC, who took office less than a year and a half, announced his resignation. The position was assumed by Ding Xuedong, chairman and chief executive officer of China Investment Corporation and chairman of Central Huijin. Jin Liqun will serve as the deputy governor of the Asian Infrastructure Investment Bank which is under construction.

A few days ago, Peng Wensheng, the former chief economist of CICC, left. His new owner is CITIC Securities, which ranked No. 2013 in 9 items by the China Securities Association in 5. Prior to this, the personnel turmoil of CICC had begun to show signs. In May, CICC Managing Director and Executive Chairman of Investment Banking Committee Jiang Guorong resigned. In September, CICC QFII (Qualified Foreign Investor) business sales director Xu Jian resigned. They have joined the current comprehensive competitiveness of domestic joint venture investment banks. The number one UBS Securities.

CICC, known as the "Whampoa Military Academy" of international talents in China's investment industry, had its original structure disrupted within half a year, and the instability of the people caused by the resignation of executives became the primary problem it faced at the moment.

According to insiders of CICC, Zhu Yunlai’s core position in CICC has long been shaken. “Many orders are ignored by high-level executives, and internal reforms cannot be pushed at all.” According to him, CICC’s internal “hidden dragon and crouching tiger”, Zhu Yunlai has become a " "Commander of bare poles", some small interest groups hold different opinions on the reforms implemented by Zhu Yunlai. This is also the main reason why CICC has not had a clear reform route despite the limited business model.

An industry insider familiar with CICC told reporters that since the establishment of CICC, it has been valued by the back-up high-level management because of its mission of listing state-owned enterprises. Zhu Yunlai has a special status and has always been a proud capital of CICC. Since 2008, the investment banking business of CICC began to decline. The State Council appointed Li Jiange and Jin Liqun respectively to serve as the chairman of CICC to assist Zhu Yun in the internal management and reform of CICC, but the results have been minimal. Now these three have left. This shows that the "administrative hand" that assisted CICC has been released. CICC's future destiny can only rely on its own efforts in the fierce market competition environment.

How did the former investment banking legend fall into a trough?

As the first joint venture investment bank specially approved by the State Council, CICC has led a large number of state-owned enterprises in overseas listings. The company's investment bankers are mostly well-known financial returnees, most of whom are professional, wise and well-connected. In 2009, CICC ranked first among all securities firms with an IPO underwriting revenue of 10.9 billion yuan, with a market share of 20.64%.

However, after many central enterprises landed in the capital market, the resources for large domestic companies to go public were gradually reduced. The once-brilliant "large order model" of CICC lacked a continuous market environment. In 2010, CICC's IPO underwriting revenue quickly shrank to 7 million. Yuan, only five company stocks were underwritten that year.

Since then, CICC's investment banking business has declined year by year. At the same time, other domestic securities companies rely on the launch of the Growth Enterprise Market, and most of them have made huge profits. Even in the years when the IPO was suspended, most securities companies have also made new breakthroughs in other innovative businesses. In 2013, in the list released by the China Securities Association, CICC's ranking in the industry fell to 33rd.

In recent years, seeking to transform the investment bank's operating model has become the top priority of CICC. The business characteristics of CICC determine the staffing and resource utilization of investment banks, focusing on serving large state-owned enterprises. CICC not only has limited resources but also lacks experienced talents in the development of SME listing projects.

In 2014, the impressive listing of Oseikon with CICC as the main underwriter was a landmark failure in the history of CICC.

On January 1th, Aosaikang announced the results of offline subscriptions. The issue price-earnings ratio was 9 times. The transfer of old stocks raised nearly 67 billion yuan, much higher than the 32 million yuan raised for new shares. Immediately triggered an uproar in the capital market. In the early morning of the next day, Oseikon announced the suspension of the issuance, and CICC's operations in the incident became a target of public criticism.

In the process of underwriting Oseikon’s public offering, CICC instructed the financial public relations company to produce promotional articles, citing the research report of the project’s distributor Guojin Securities, and publish it in the media, and instructed the financial public relations company to promote Oseikon’s "low valuation, "The market outlook is bullish" remarks induce investors to subscribe for stocks at high prices.

Due to the violations in the Oseikon incident, the China Securities Regulatory Commission decided to take regulatory measures to issue warning letters against CICC, and the Securities Association of China adopted self-regulatory measures against CICC and other responsible entities.

Analysts said that CICC’s manipulation of such operations has caused the regulators to be scolded as profit groups and give the green light; the regulators were scolded as stupid and lack of professionalism; and the regulators were scolded by the administration. Hand intervention in the market, simple and rude.

Osaikon is the first batch of companies approved to go public after the IPO was suspended for more than a year. As Osaikon's IPO underwriter, CICC is eager to cash in profits. Insiders revealed that although the company has given reminders to the relevant project team, it has not attracted attention.

A person familiar with the Oseikan incident told reporters that the Oseikan incident had dealt a huge blow to CICC. At that time, CICC was internally studying and preparing to go public in Hong Kong. This incident once again triggered internal fluctuations in the company. "The short-term listing of dreams was shattered, and perhaps the most direct reason why CICC executives chose to leave."

An insider of a catering company that is seeking to go public admitted to reporters that the original choice of CICC as the sponsor was because of its "authority." "The performance of CICC in the Osaikon incident disappointed us, and the general environment for listing is not optimistic. , The company decided to wait a few more years."

In recent years, CICC realized that its original strategy of relying on large projects could no longer continue to make profits for the company. In 2010, it established an IPO team for SMEs, and in early 2012 it established a SME financing team.

A senior executive of a brokerage firm engaged in the NEEQ business mentioned to reporters that since last year, securities firms have been fighting for the NEEQ business particularly fiercely. It is reported that CICC once charged only 50 yuan for a company’s NEEQ listing business. "It's a little hungry, and the company can't make a profit from it. It just loses money and makes yelling," he said.

"CICC is super international. They open their mouths as a foreign language. They only wear shirts with embroidered names, cufflinks, and ties even when they sleep." The brokerage industry ridiculed this. However, this former investment bank aristocrat is now lonely.

Although CICC has been striving to alleviate the crisis through diversified development in recent years, CICC, which is poised to re-start due to the “leakage of houses”, has encountered the suspension of its A-share IPO in 2013 and the market in the past two years. Liquidity is quite tight, and CICC's transformation path has not improved much.

Today, CICC, which frequently runs into small and medium-sized enterprises, still has not clarified the direction of its future business transformation. On the road of diversified development, it has encountered the real problem of lack of capital. How will it go in the future? CICC executives are still hesitating.

Where did CICC lose?

High expectations were placed on CICC at the beginning of its establishment. It is China's first real investment bank and is an extremely important step for China to join the world economy and society. Wang Qishan, then vice president of China Construction Bank, dreamed of turning CICC into a Chinese investment bank with branches all over the world, able to compete with industry leaders, including Morgan Stanley.

In a report in the Financial Times, “CICC has always been a microcosm of China itself” and “it is a lens to observe China”.

CICC, which has attracted much attention from Chinese and foreign institutions and media, has achieved great success at the beginning of its establishment. "If you are the only player in the market, it doesn't matter whether you manage it well or not. The privilege that CICC has is that it was the only investment bank in China at that time. If there is an overseas listing, CICC must participate in it."

In 2000, the gross turnover of CICC reached 1.7 million US dollars. The company returned the original XNUMX million U.S. dollars in full to the original investors, and the Chinese employees also unexpectedly received millions of dollars in bonuses.

And the ills of "too successful" also followed. In the eyes of an investor who had participated in the bid for equity in CICC, the CICC model was "a fresh trick." This trick is to list state-owned enterprises. To win the underwriting and sponsorship entrustment of these companies, the most important thing is to obtain the recognition of these state-owned enterprise executives.

James McGrego, a former correspondent for the Wall Street Journal in Beijing, talked about Zhu Yunlai in his book "Billion Consumers" on the Chinese market. According to the book, Zhu Yunlai, as the helm, initially brought a large number of customers to CICC. On the other hand, because of his own "stubborn self-confidence", he usually makes decisions on his own and rarely solicits the opinions of others. "People who disagree with Zhu Yunlai's opinions are kept cold." Such a corporate culture makes it difficult for CICC to establish a sound corporate management system.

In the book, CICC is referred to as one of the most chaotic, problem-laden and contradictory joint ventures in modern Chinese history. The well-known economist Xu Xiaonian served as the chief economist in the research department of CICC. It is rumored that he was transferred to a teaching position due to a discord with the senior management. He himself has never commented on the matter in public.

Zhu Yunlai said frankly in his letter of resignation that the reason for his resignation was "from a long-term perspective, in order to actively promote the growth of the team, systematically establish a long-term system, and form a healthy and benign management transfer and continuation mechanism."

When CICC encountered a capital bottleneck, the management had refused to go public for financing, which also made CICC missed the capital market financing opportunity. Given the limited development of its original business, CICC did not have sufficient capital reserves to support innovation.

CICC's 2013 annual report stated that the company has various financing channels. Financing tools include selling repurchase contracts, dismantling the inter-bank market, bank credit, refinancing, issuing bonds, and borrowing subordinated debt. As a securities company, CICC still has relatively large limitations in its financing capabilities. The maximum period of inter-bank market lending is only 7 days, and the bank’s credit extension to securities companies has also received more regulatory restrictions. To a certain extent, it restricts the company's liquidity management.

According to analysis by industry insiders, the advantages of CICC are becoming less and less obvious. In terms of contacts, CITIC Securities and Bank of China International have come from behind. In large projects, they already have the conditions to compete with CICC, and they have contracted some that belonged to CICC. Big project.

CICC, as the former securities "boss", has been surpassed by CITIC Securities in terms of net capital scale and net profit.

How to relieve the danger?

At present, CICC is faced with a complicated market environment and huge operating pressure, and the impact of the human incident and the earthquake inside can be described as "encountered by the enemy." Whether CICC can resolve the crisis, the key lies in the changes that the new company executives Ding Xuedong and Lin Shoukang will bring to CICC.

Industry insiders revealed to reporters that Ding Xuedong, chairman of Central Huijin, also serves as chairman of CICC, indicating that Huijin will further intervene in the company’s management, while Lin Shoukang is obviously only an agent. The new CEO of CICC will control the development direction of the company in the future. The real decision maker.

CICC insiders hold different views on Lin Shoukang's temporary CEO position. Those close to him are confident about it, while others are skeptical. They are full of expectations that the company can select a more suitable helm as soon as possible.

In recent reports on CICC, most people expect that CICC’s successful listing will bring opportunities for its transformation. However, the issue of CICC's listing has been spread for many years. Why hasn't there been any substantial progress?

The issue of “shadow stocks” is generally considered to be one of the biggest obstacles to CICC’s listing. CICC’s shadow stocks are a disguised form of equity incentive measures that can pay dividends like ordinary shares, but holders have no voting rights and board seats. .

According to the “Wall Street Journal”, between 2004 and 2006, CICC granted 20% of the company’s shares to management and employees in the form of shadow stocks. The owners of these stocks are not clear to the outside world, including the owners of Zhu Yunlai. The shares held have not been disclosed to the outside world.

CICC stated that internally, it has been conducting in-depth research on various capital operation methods including listing, and all strategic measures that are powerful for the company's development are under consideration.

Analysts believe that once CICC goes public, these 20% of the shadow stocks will become sunshine stocks. For the owners of these stocks, they do not want this.

The above-mentioned people told reporters that the relevant senior executives and employees of CICC have left the company, which may provide more possibilities for CICC to go public, but this is definitely not what will happen during this period.

"If CICC continues to make poor profits and cannot go public, the possibility of CICC owners selling some of their equity will not be ruled out," a market person who has worked with CICC told Tencent Finance.

As early as 2008 when Morgan Stanley planned to sell its equity, as another domestic securities company that was comparable to CICC at the time, a senior executive of CITIC Securities said that the acquisition of CICC equity should "it should be discussed." Central Huijin, the major shareholder of CICC, also said that it had no intention of opposing (being acquired), depending on the price.

In fact, there is currently no news about the merger or acquisition of CICC with a securities firm, and it is not the right time for its shareholders. The merger of Hongyuan Securities and Shenyin & Wanguo last year is considered to have kicked off the merger of CIC brokerage firms. Whether CICC will continue this approach in the future is still unclear.

According to statistics from Dealogic, in the case of the suspension of A-share IPOs in 2013, CICC still ranked first among A-share equity financing brokers by promoting overseas businesses such as Hong Kong stock IPOs and cross-border mergers and acquisitions; qualified foreign institutional investors (I.e. QFII) the number one customer share. Compared with other brokerage firms, CICC still leads in traditional business.

It seems that CICC has new business now. On October 10, the Chinese high-speed rail manufacturer China South Locomotive and China CNR reported about the merger rumors, and the integration plan maker was CICC. Whether this field will become a new gold nugget for CICC is yet to be known, but it is certain that in the future, it will not lack competitors.

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