| Red Chips
analyses leading Chinese companies and their operating environment in
China during the 1990s. In China, it is governmental organisations
that determine the formation of corporate structures. These
government-backed Chinese companies often follow a trail that leads
back to foreign equity markets, particularly Hong Kong's stock
exchange. The examination of the companies
examined by the book is a first in the English language. Coverage of
China's economic and corporate environment has been restricted to
scholarly studies targeting periods distant enough for most of the
data to be no longer applicable, or by contemporary media with
attention focussing on current events.
Red Chips bridges the two main types of China
coverage and provides both the current context of China's reforms and
the content of in-depth analysis of several of China's leading
companies. Special focus is placed on the CITIC group of companies,
with analysis of both CITIC Beijing and CITIC Pacific. Additionally,
particular attention is paid to the Guangdong Enterprises group of
companies. Forming part of the backdrop for the analysis of China's
budding corporations is also an overview of China's banking system and
its relationship to Chinese enterprises and finally the historic role
of the steel industry illustrates the problems of separating state
planning and management issues.
The second edition, 1998, includes a new epilogue
and analysis of the current Asian financial crises, and the
implications for the future of red chip companies.
Critics Comments
"While the locally [Hong Kong] listed companies of
Chinese government operations are becoming more organised in their
business strategies, their mainland-based holding companies are still
an amorphous blob with grey areas which cast a shadow over the
credibility of their flagship listed vehicles.
"This concern is raised in a new book, Red Chips
and the globalisation of China's enterprises, by Credit Suisse
First Boston analyst Charles de Trenck.
"Thought to be the first of its kind, Red Chips
deals with the history of the corporatisation process on the mainland.
Chapters are devoted to such prototypes as Citic Beijing and Citic
Pacific, and other leading companies.
"It deals with the complex structures around which
listed entities are formed and operate, and focuses on the links to
the state banking sector.
"'I was working for a European bank and
covering a lot of Chinese companies, the large red chips and Chinese
enterprises,' Mr de Trenck said. 'The motivation for me doing this
book was working on these files and realising that they contained a
lot of information that wasn't available for general discussion. So I
decided spend my spare time on the analysis of these companies.'
"I realised that for a lot of companies I was
looking at, the information on the listed companies tended to be more
user-friendly, more neatly presented, whereas the holding companies
that I had worked on on the banking side tended to be more disparate,
more the type of sprawling conglomerate. That's how companies such as
Guangdong Enterprises began...as representatives or holding companies
for the regional governments.
"We tried to understand the relationship between the
parent and the listed companies."
Mark Sharp, South China Morning
Post
"The main questions addressed in Red Chips and
the globalisation of China's enterprises are: if the red chips are
the best China has to offer, how do the companies rate in global
terms, and what, if anything, is holding them back?
"Editor Charles de Trenck and contributors Simon
Cartledge, Anil Daswani, Christian A Katz and David Sakmar converge on
the topic from several sides, bringing their own particular expertise
to bear on discussions of individual companies, the Chinese banking
system, specific banks, and that most achetypal and historically
resonant of Chinese industries, steel production.
"They provide short profiles of 17 conglomerates, a
longer investigation of three companies with contrasting styles of
management – Cosco, Shougang and China Resources – a chapter each on
Citic Beijing and Citic Pacific and a chapter on Guangdong Enterprises
and Guangdong Investment.
"The longer profiles explore the way in which, to
varying degrees, the political loyalties of the parent companies have
constrained their growth and continue to influence the business
decisions of their listed subsidiaries.
"Though small, and considerably less expensive than
many books published on China business, Red Chips provides
enough in the way of facts and figures to be a useful resource for
anyone seeking to find out about the structures and operations of
China's conglomerates.
"It is encrusted with handy charts and graphs, and
includes diagrams which are invaluable in helping to untangle the
often involved structures of conglomerates consisting of numerous
almost identically named companies which are perpetually buying and
selling bits of each other."
Lucy Benson, Finance Asia
"Are red chips still worthwhile investments? The new
book Red Chips answers the question. If the companies are
focussed in their business, and profit-driven, as any other companies
that are successful in the rest of the world, an investor can
determine if they represent good value. Good management accomplishes
good business and good business can be evaluated on productive merit.
"Charles de Trenck argues – in the first chapter on
Chinese capitalism and Chinese companies and a second chapter on the
growth of China's key conglomerates – that most of them shall have to
restructure because a majority are unfocused and directionless.
"The story of the Chinese banking system is well
described in Christian Katz' overview in the chapter "Financing
Chinese conglomerates".
"CITIC Pacific is presented in its own chapter by
Anil Daswani; its parent CITIC Beijing by Simon Cartledge.
"Chapter 7 by de Trenck tells the story of Guangdong
Enterprises and Guangdong Investment. Not surprisingly he concludes
that the 'principal challenge ahead for the listed company is to
develop hands-on skills over its existing subsidiaries' and a key to
its success is 'how seriously management deals with cash flow and its
significant number of problem businesses'.
"'There is little capitalism...at work in China at
present' writes de Trenck in his epilogue. Some companies, however,
distinguish themselves by virtue of good management (not by pattern of
ownership) and organisational structure and do therefore represent
good value. He lists CITIC Pacific, China Resources, and COSCO."
Bjorn H Jernudd, Dragon News
(Swedish Chamber of Commerce in Hong Kong)
Readers Comments
Extract
Copyright © Charles de
Trenck, Simon Cartledge, Anil Daswani, Christian A Katz & David Sakmar
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