Among the banks helping General Motors Co (GM) with its initial public stock offering next week are two identified by initials only: ICBC and CICC.
People in the US uncomfortable with US federal government’s ownership of GM may want to hear more: One of those banks is the Industrial and Commercial Bank of China (ICBC, 中國工商銀行), one of China’s four big central government banks. The other, China International Capital Corp (CICC, 中國國際金融), is a joint venture run primarily by Central Huijin Investment Ltd (中央匯金), an arm of the Chinese government and Morgan Stanley.
This is the first time Chinese government banks have participated in a major US-issued initial public offering (IPO), according to IPO tracking firm Dealogic.
The banks are listed as co-managers in the offering, meaning they will sell a portion of the new shares.
Chinese automaker Shanghai Automotive Industry Corp (SAIC, 上海汽車), GM’s partner in China, is finalizing plans to buy about a 1 percent stake, worth about US$500 million, in GM’s IPO, the Wall Street Journal reported on Friday. SAIC is owned by the Shanghai city government.
Other foreign investors that are interested include several sovereign wealth funds located in the Middle East and Asia. The Journal says those funds, which manage the finances of royal families and some nations, could invest US$1 billion in GM’s IPO.
There could be political backlash for US President Barack Obama, who has spent the past week in Asia addressing economic issues, like currency exchange differences between the US and China. Obama has said that China artificially deflates the yuan in an attempt to make its exports cheaper.
Many people in the US were unhappy when the US government bailed out GM, calling the company “Government Motors.”
GM’s stock offering on Thursday will reduce the US Treasury’s stake in the company from 61 percent to 43 percent, and will help payback the more than US$50 billion that taxpayers invested in GM to keep it from collapsing. More stock offerings will happen in the next year or so, letting the government fully divest from the automaker.
“It’s a very political topic, but what Americans need to remember is that General Motors is an international company,” said Rebecca Lindland, an analyst with IHS Automotive. “If we want to get our money back, we need to understand that they have to do business on a global basis.”
The US Treasury has been clear that international investors are welcome to invest in GM, and many outside the US are considering taking stakes in the company.
“We expect that a large and diverse group of institutional investors will be offered an opportunity to participate, with no single investor or group of investors receiving a disproportionate share or -unusual treatment,” the US Treasury said in a recent statement.
The US has become a popular haven for Chinese investors, second only to Australia in attracting Chinese stock investments, said Derek Scissors, a research fellow at conservative think tank the Heritage Foundation. The first half of this year was a record year for China, Scissors said. China has sunk US$45 billion into investments and engineering projects worldwide. About US$1.6 billion of those investments came to the US.
In China, businesses operate with the funding and blessing of the government, said Tim Dunne, director of global automotive operations for J.D. Power and Associates. The government behaves like an interested shareholder, ensuring companies have competent management and ensuring the companies boost economic growth in their regions.
Many Chinese automakers are looking for a way into the US market, he said. China is the largest car market in the world, but the US is the most profitable, he said.
“The amount of money changing hands here is much greater,” Dunne said.
The average selling price of a car in the US is US$27,500, compared with about US$17,000 in China.
“Multiply that over millions of vehicles and it’s quite a difference,” Dunne added.
SAIC and GM already have a long-standing partnership in China — GM could not sell cars in China without partnering with a local business — and it’s unclear what size stake SAIC may take in GM.
The deal would need Chinese government approval.
Michael Maduell, president of the Sovereign Wealth Fund Institute, a California-based group that watches sovereign wealth fund investments, said global investors are looking at the US because they believe the overall market is undervalued. Other potential investors in GM include Abu Dhabi’s Mubadala and Singapore’s Temasek, which are both known for actively investing in companies, Maduell said.
Investors are “looking at emerging markets, like China and India, but all those assets are overvalued,” Maduell said. “America still has a lot of fantastic investment opportunities in real estate and small to mid-cap stocks.”
CHIP WAR: Tariffs on Taiwanese chips would prompt companies to move their factories, but not necessarily to the US, unleashing a ‘global cross-sector tariff war’ US President Donald Trump would “shoot himself in the foot” if he follows through on his recent pledge to impose higher tariffs on Taiwanese and other foreign semiconductors entering the US, analysts said. Trump’s plans to raise tariffs on chips manufactured in Taiwan to as high as 100 percent would backfire, macroeconomist Henry Wu (吳嘉隆) said. He would “shoot himself in the foot,” Wu said on Saturday, as such economic measures would lead Taiwanese chip suppliers to pass on additional costs to their US clients and consumers, and ultimately cause another wave of inflation. Trump has claimed that Taiwan took up to
SUPPORT: The government said it would help firms deal with supply disruptions, after Trump signed orders imposing tariffs of 25 percent on imports from Canada and Mexico The government pledged to help companies with operations in Mexico, such as iPhone assembler Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), shift production lines and investment if needed to deal with higher US tariffs. The Ministry of Economic Affairs yesterday announced measures to help local firms cope with the US tariff increases on Canada, Mexico, China and other potential areas. The ministry said that it would establish an investment and trade service center in the US to help Taiwanese firms assess the investment environment in different US states, plan supply chain relocation strategies and
WASHINGTON POLICY: Tariffs of 10 percent or more and other new costs are tipped to hit shipments of small parcels, cutting export growth by 1.3 percentage points The decision by US President Donald Trump to ban Chinese companies from using a US tariff loophole would hit tens of billions of dollars of trade and reduce China’s economic growth this year, according to new estimates by economists at Nomura Holdings Inc. According to Nomura’s estimates, last year companies such as Shein (希音) and PDD Holdings Inc’s (拼多多控股) Temu shipped US$46 billion of small parcels to the US to take advantage of the rule that allows items with a declared value under US$800 to enter the US tariff-free. Tariffs of 10 percent or more and other new costs would slash such
Hon Hai Precision Industry Co (鴻海精密) is reportedly making another pass at Nissan Motor Co, as the Japanese automaker's tie-up with Honda Motor Co falls apart. Nissan shares rose as much as 6 percent after Taiwan’s Central News Agency reported that Hon Hai chairman Young Liu (劉揚偉) instructed former Nissan executive Jun Seki to connect with French carmaker Renault SA, which holds about 36 percent of Nissan’s stock. Hon Hai, the Taiwanese iPhone-maker also known as Foxconn Technology Group (富士康科技集團), was exploring an investment or buyout of Nissan last year, but backed off in December after the Japanese carmaker penned a deal