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1. Why did ICBC feel it was necessary to issue equity in markets outside of China?
The financial crises which were erupted in South Asian market emerged the challenges to International Monitory Fund (Charles, 2011). In order to keep the crisis in control, the IMF provide the financing and loans to various economies including Indonesia, South Korea, Thailand Land, and more in order to stabile their currencies. The seed of these financial crises in various economies in the world were sown during last few years when these countries were enjoying he unprecedented growth (Charles, 2011). In response to stated crisis in the various world economies, the china government has responded effectively. The Chinese investment in international market is dominating since last decade (Dennis, 2006). China has made investment in various international markets including various developed and developing economies including US economy, South Africa, Africa and alike. China will further issue the lending of amounting 8.1 trillion Yuan which is approximately equals to 1.23.trillion US dollars, during financial year 2011 (china business news). This new lending is 2 percent more than that was in last year (7.95 trillion Yuan). Among this lending ICBC (Industrial and Commercial Bank of China) will lend about 880 billions Yuan. Chinese foreign investment is dominating by the resource extraction (Primary Oil, metals and minerals, manufacturing sector (textiles and automated assembly lines), spectrum (including services and logistics), dealing with central banks of various economies and the services and mining sectors (Charles, 2011).
2. What are the advantages of such a move?
The foreign investment made by any country has some underlying advantages and same is the case in the investment made by the china in various economies including US economy after the real estate crisis in US economy (Dennis, 2006). After the real estate crisis in US economy had faced, the Industrial and Commercial Bank of China had invested huge amounts in US economy. The possible advantage that the ICBC (Industrial and Commercial Bank of China) may engoy includes:
2.1. Economies of scales and economies of scope. The economies of scale would lower the prices, reduces the cost and improve the services and product innovation.
2.2.The synergies and sector linkages can lead to improve the general and specific competitiveness as well.
2.3.Moreover, it would leads to improve and increase the overall stability with the help of diversified revenue stream.
2.4.Due to the increase in variety of products and services and progress in innovation would create and enhance the customer's loyalty.
2.5.Market penetration of Chinese in the different economies would also be one among various benefits that may be in results of stated policies of the china and ICBC (Industrial and Commercial Bank of China).
2.6.While complying with relevant restrictions and statuary permissions, new corporate structure facilitate to gain maximum commercial advantages and benefits. Some authors refer stated advantage as a separate and individual.
2.7.This may also be perceived as the constitution of form of "Regulatory Avoidance", which is either desirable or undesirable, depending upon contents and purpose of imposed underlying restrictions.
3. Can you see any disadvantages?
It is natural phenomenon that any thing having advantages or benefits also associate some risks and disadvantage along it as the advantages and disadvantages move side by side. Similarly, along with stated advantages, difficulties which may arise include "Double Gearing" of capital, intra-group exposures, risk management capacity, lack of sufficient management, management autonomy and authority, conflict of interest and interest rates, supervisory problems including transparency, identification of various suitable management and control centers and so forth (Dennis, 2006).
4. What was the attraction of the ICBC listing to foreign investors?
Economies of scales and economies of scope, synergies and sector linkage, and other attractions as stated above.
5. What do you think are the risks for a foreigner associated with investing in ICBC?
The most important and significant risk that would arise is the possibility that the transfer of loss, transfer pricing, among the entities and with in the group and resultantly between separate financial sectors involved. Significantly, losses suffered in a more volatile area of group activity including derivatives, currency and securities subsidiary might then be transferred to banking and insurance of same group. Even, in absence of actual and legal financial liability, this contagion can spread through reputational damages.