My CFC colleagues just completed our latest research report, on investment banking. Itâ€™s titled â€œæŠ•èµ„é“¶è¡Œçš„é‡è¦æ€§â€. A copy can be downloaded here:Â
The report examines the history, structure and central role of investment banks in raising capital for companies. Like other CFC reports, this one was meant to add meaningfully to the quality of information available in Chinese on financial topics relevant to SME owners and other private sector entrepreneurs. Itâ€™s a part of our work that I take special pleasure in. It can widen the circumference of our impact and contribution, beyond the relatively small group of CFC clients and the PE firms that finance them.Â
We want the reports to be read widely, and to have some staying power. In choosing topics for these reports, weâ€™re guided most strongly by our daily interactions with Chinese entrepreneurs, by the questions they raise, and problems they confront. So it is with the latest report.Â
Investment banking isnâ€™t well-understood in China, for the most part. Thereâ€™s a lot of pigeonholing. Investment banks are primarily known for their IPO work, and not much else. TheÂ core function of investment banking â€“ raising capital for companies –Â is often missed.
This lapse speaks volumes about a larger, endemic problem in Chinese business: a shortage of growth capital among private businesses,Â and an accompanying lack of knowledge how to raise it.Â
Equity capital is used far less in China than the US to finance corporate activity. Bank loans could potentially fill the void somewhat, but they are very difficult for private Chinese companies to obtain from the countryâ€™s state-owned banks. The result: private companies under-invest and so grow far more slowly than market opportunities warrant.Â
Of course, our new Chinese-language report on investment banking isnâ€™t going to untangle this mess. Its aim is far more modest: to provide research and a rationale for investment banksâ€™ central role in the capital-raising process.