It has been billed as the world's biggest share offering in six years, a doorway into the fastest growing asset market on the planet and an opportunity to grab a piece of China's economic miracle.
But when the Bank of China (中國銀行) makes its US$9.9 billion debut on the Hong Kong stock exchange next Thursday, investors will have to ask whether the new bullishness about China's financial system can erase old doubts about corruption, nonperforming loans and economic nationalism.
After a surge in mainland stock prices since the start of the year, tens of thousands of speculators appear already to have made up their minds that any chunk of China, no matter how imperfect, will bring a good return. In the past week huge queues of prospective investors have lined up outside Bank of China branches in Hong Kong for a chance to buy some of the 1.28 billion shares.
According to local media, there has been so much interest that the bank has had to print an extra 1 million subscription forms and 100,000 more copies of its prospectus.
Royal Bank of Scotland headed a consortium that bought a 10 percent stake in Bank of China last year for US$3.1 billion. Criticized as risky at the time, that investment is now expected to show a substantial paper profit. But domestic critics have accused the government of selling off the country's second-biggest bank too cheaply, even though only 10 percent will be floated.
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But it is also plagued by the problems that have bedeviled its rivals. China's financial system remains burdened by excessive lending to state-owned enterprises and weak internal controls.
According to the IMF, the Bank of China and its three biggest rivals pay no attention to credit risk when setting loan rates. Government figures suggest they are weighed down by a combined US$137 billion of bad loans, even after a huge injection of public funds when the Bank of China received US$22.5 billion to cover delinquent lending.
The Bank of China has been among the worst affected by corruption. In March, five executives were arrested on suspicion of defrauding the institution of US$20 million. Last year, a former vice president, Liu Jinbao (劉金寶), was given a suspended death sentence for embezzling 14 million yuan (US$1.75 million). Wang Xuebing (王雪冰), the bank's president from 1994 to 2000, was sentenced to 12 years in prison for taking millions of yuan in bribes and gifts.
But it is lax credit control that is thought to pose the biggest danger. Bank lending is growing sharply, fueling excess investment in luxury apartments, automobile firms and cement companies. If the economy slows, non-performing loans could rise again.
It is a risk investors seem more than willing to take. Even though the Bank of China's flotation will be the biggest since the US$10.6 billion share sale by telecoms group AT&T in 2000, its record will not stand for long. Later this year, the Industrial and Commercial Bank of China (中國工商銀行) expects to raise more than US$12 billion in its IPO.
The world's willingness to bet on China has never been greater.