The government-controlled Industrial & Commercial Bank of China (ICBC) purchased a percentage of Fortis Securities, which happens to be an American financial institution. The deal is perfectly legal, as Fortis Securities has 75 customers and no commercial or business clients. Insiders claim that ICBC paid $1 for the buy-in. The low price allowed ICBC to take over over the Prime Dealer Services unit of Fortis Securities. ICBC hopes to use its share to create a base to potentially expand its underwriting of securities in the U.S. market. ICBS expects the deal will add $15 million in profits to it’s bottom line.
It is unclear just how the Chinese-government-owned and -controlled Industrial & Commercial Bank acquisition of Fortis Securities will benefit China. With a very murky future, one thing is certain: China has managed to pull off a very shrewd and tactical move with this purchase.
It is unlikely that Fortis Securities is going to be a huge financial performer for ICBC. Though what it lacks in profits it will make up for in strategically placing China in America’s financial system. In other words, China now “has a dog in the race,” and will eventually have some say in American economics.
It’s unclear whether these developments are something that Americans need to worry about. It could be a good thing or a bad thing.
On the one hand, it will certainly revitalize an American financial institution that was barely treading water. It’s also a good sign that ICBC doesn’t own Fortis outright, leaving America with at least some “say so” in the institution’s operations.
Now there is another positive aspect to this deal, maybe. By buying into America’s economy, China will be gradually forced into adjusting its own money and raise the Yuan (Renminbi) to its actual worth, instead of undervaluing it.
I don’t find this deal all that scary, but I am probably in the minority. I see that there is a lot of potential for good things to come of this. Naturally, I can’t see into the future, but I see this move as a vote of confidence from China in America’s financial structure, deficit and all.
China has become a financial super-power on the world stage, and ICBS obviously believes it can gain something by buying into Fortis Securities. To be more accurate, ICBS bought the Prime Dealer Services unit of Fortis Securities, which is controlled by France’s BNP Paribas SA.
Shocking and surprising are a couple of words that describe this deal, but after the initial shock wears off, we’ll be able to look more closely at what is actually happening and whether or not the United States is under any type of threat.
Based on the extremely limited information thus far, I am under the impression that although this news initially shocked me sober, there really won’t be anything to fear. I would go so far to say that we will hardly even notice any changes. In the grand scheme of things. This is not a gigantic deal, but it is fairly big and certainly an aggressive move by China.
The only thing that worries me is the Supreme Court ruling that allows corporations and business entities to contribute money to political election campaigns of potential representatives. With China now being part owner of an American bank, things could get kind of dicey.
What’s done is done, and now we have to wait and see. I’ve got my fingers crossed, and I hope you do too.