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China International Capital Corporation (CICC), a prominent investment bank in the country, has said it will acquire two smaller brokerages as part of a government push to create financial giants with global scale.
Under the deal, the state-owned CICC was set to absorb Dongxing Securities and Cinda Securities through a share-swap transaction, all three companies said in stock exchange statements filed late on Wednesday.
The three have combined total assets of just over Rmb1tn ($140bn) as of the end of September, according to exchange data compiled by Financial Times, making the proposed merged entity the fourth-largest brokerage in the country.
CICC said the merger would significantly strengthen its net capital base, currently at Rmb46bn, and give the combined entity a “sharp focus on its core mission of serving national strategies and the real economy”.
The pricing of the swap for the CICC merger has not been disclosed.
China’s vast financial sector has seen a wave of consolidation as economic growth slows and Beijing works to cultivate bigger financial players closer to the scale of the likes of JPMorgan and Morgan Stanley.
“The consolidation drive is fundamentally about constraining risk,” said Han Shen Lin, a professor at NYU Shanghai, who added assets and institutions were being pulled under “tighter state umbrellas”.
CICC, which was founded in 1995, was originally formed as a joint venture mainly backed by China Construction Bank and Morgan Stanley, which fully exited in 2010.
President Xi Jinping in 2023 chaired a Central Financial Work Conference, a high-level party meeting, which emphasised the need to cultivate “first-class investment banks and institutions” and to “support large state-owned financial institutions in becoming stronger and better”.
In a statement, CICC referenced the “guiding principles” of the Central Financial Work Conference.
Last year, Guotai Junan Securities and Haitong Securities also merged to create a brokerage with about $230bn in assets, the largest in China at the time.
Central Huijin, an arm of China’s sovereign wealth fund, has direct or indirect stakes in all three players in the CICC deal. Central Huijin is also a major player in the country’s so-called national team of stock market investors.
Leading state-owned financial firms such as CICC have cut pay, including for top executives, amid a government campaign to rein in bankers’ wages and subdued deal activity.
China’s stock market has rebounded in the past year, following a series of policy measures last September, including support for share buybacks.
The CSI 300 index of Shanghai- and Shenzhen-listed stocks is up 20 per cent since January.
Additional reporting by Cheng Leng in Beijing