The Wall Street Journal announced in the Monday edition that the largest lender in China, Industrial & Commercial Bank of China Ltd., has entered the broker-dealer business in the U.S.
According to the Wall Street Journal, ICBC took over the Prime Dealer Services unit of Fortis Securities, which did belong to France’s BNP Paribas SA, for $1. Fortis only has 75 customers, and ICBC wants to use it as a base for expanding its underwriting of securities in the U.S. market. They are hoping for $15 million of annual profit from the new deal.
With China’s economic growth over the past decades and years, could this be the move that China needs in order to actually compete with the U.S. as a global world economic power?
Of course this would not prove to be a significant move into global economic power overnight. ICBC would have to start small and gradually increase its way into the already crowded and established market of the broker-dealer business in the U.S.
Nonetheless, ICBC has been very successful in China and the other countries that it has expanded into. If ICBC is able to transfer their knowledge of success and make it usable in the U.S. market, China could very well be a contender as the global economic power.
This could be the start of something that could be a huge impact on Chinese business interests. If ICBC’s move proves to be a successful one, it could be a model for other Chinese banks to take similar actions. There has been failure in the past of other Chinese banks trying to invest in the U.S. market.
Although others have failed at attempts investing in the U.S. market, none of them were ICBC, who is not only the top lender of China but also the world’s most profitable bank at the time. Maybe this is what China needs in order make a stand as the global economic power, a foothold into the market that is held by the current power, and to slowly work its way within it and bring other Chinese investors with it.
Success for ICBC could lead to expanding to other parts of the market besides just underwriting securities. Other types of securities could follow, and even Chinese banks could open up in the U.S.. Other Chinese businesses are probably watching ICBC in order to see how well they do. They could be encouraged by the example of ICBC enough to start looking for their own foothold in the U.S. market.
Lingling Wei and Dinny McMahon, “China Makes U.S. Inroads, Snapping Up Broker Unit.” The Wallstreet Journal.