Investment bank CICC hopes to become a “bridge” for Chinese companies in Southeast Asia

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China International Capital Corporation said Southeast Asia was just the “tip of the iceberg” for Chinese companies looking to explore opportunities in the region, as the state-backed investment bank expands its overseas operations to serve companies looking to expand.

CICC has approximately US$90 billion in assets, and its shareholders include Tencent and Alibaba. The company said its third phase of overseas growth targets Indonesia, Vietnam, Malaysia and Thailand. Southeast Asia, with a population of 700 million, is China's largest trading partner.

Stephen Ng, the bank's head of Southeast and South Asia operations, said that since the outbreak, the bank's Singapore office, like all of CICC's overseas offices, has more than doubled its staff to 60 people .

CICC was approved to set up a marketing and sales representative office in Vietnam in September and will apply for a financial consulting license in Indonesia. He said offices in Malaysia and Thailand would follow in the coming years.

“What we see is just the tip of the iceberg of China’s outbound investment,” Wu told the Financial Times. “Southeast Asia's location, culture, language and natural resources mean it is hugely attractive to Chinese companies.”

He highlighted Indonesia's opportunities in mergers and acquisitions, equity financing and bond issuance.

“Like many countries, they are still more accustomed to dollar bonds, euro bonds and yen. But CICC still plays an important role in letting them understand more about why panda bonds are closely related to their nation-building.” He said, and Projects such as the construction of Indonesia's $35 billion new capital Nusantara were cited.

CICC was established in 1995 as a joint venture between Morgan Stanley and China Construction Bank to serve mainland China and international markets. It is China's first investment bank and has been considered the go-to institution for Chinese state-owned enterprises for many years. Morgan Stanley sold its stake in 2010.

CICC, the Chinese investment bank most active in offshore trading, reported revenue of 18.6 billion yuan ($2.6 million) in the first half of 2023, up 5% from the same period a year earlier. The company did not disclose whether its overseas office companies were profitable, but according to filing documents, in the first half of 2023, offshore business revenue reached 3 billion yuan, an increase of 31% over the previous year. This includes its Hong Kong office.

In 1998, the company began to expand beyond mainland China, opening an office in Hong Kong, followed by a second phase of opening offices in other global financial centers such as Singapore, New York and London.

Wu said the bank is currently entering the third phase of international expansion, with Southeast Asia being an important part of it. It hopes to provide services in areas such as Indonesia's digital economy and the electric vehicle ecosystem, including nickel.

Wu said analysis shows that 15 years ago, 90% of the Chinese market was retail investors, but now 50% is institutional investors. “If Indonesia continues to perform well, I think we may see something similar [to China],” He said.

Ng also oversaw additional CICC services provided in Singapore. The company launched its investment banking business in Singapore in 2010 and introduced additional product lines during the pandemic, including asset and wealth management.

Wu said the wealth management business is just getting started but has been “very successful” so far. He believes China's wealthy, including family offices, are not slowing down in their focus on Singapore, even as the city-state was rocked by a massive money laundering investigation last year. “People are still knocking on our door and want to come to Singapore,” he said.

This year, the bank will focus on commercializing and monetizing the relationships it has built in the region, Wu added. It already provides services to companies such as electric car makers BYD and Geely, and CICC hopes to become a “bridge” connecting them to Southeast Asia.

“Besides BYD and Geely, there are hundreds or thousands of other Chinese companies looking for potential investment in Southeast Asia,” Wu said.

Additional reporting by Cheng Leng in Hong Kong