Research, The Development Of China's Investment Banking

Modern Investment Banks are those financial institutions that deal with underwriting and trading of stocks, mergers and acquisitions, venture capital and other financial consulting business. Despite their active participation into the market, the investment banking institutions of China still lag far more behind from so called modern ones. Most of the institutions in China are small-sized and with limited business coverage mainly on the underwriting and trading of stocks. It is of great need to, therefore, bring the investment bank of China a fast development and establish a group of competitive investment banks that are fully capitalized to play into the development of China capital market as well as the reform of the state-owned-enterprises (SOE). In view of this, the research concerning the development of the investment banking industry of China stands out as an imminent problem for China. As the most important intermediate of the capital market, the investment bank plays important roles such as channeling money, rationalizing resource allocation, promoting the development of the security market and pushing the upgrading of industry structure forward. Promoted by the economic globalization and the new technology revolution, the investment banking business has developed vigorously ever since the 1970s. The latest trends are: first, the re-convergence of investment banking and commercial banking takes the main stream and universal banking becomes popular. Second, the investment banks are more diversified and globalized, which gives financial derivatives more places. Third, new technologies are used in more scales and far more rapid paces than ever. The fourth is that the profound development of the risk management systems. The investment banking business of China saw its beginning at the early 1980s. It took the underwriting of bonds as its first step and made further move to the underwriting and broking of stocks. With the development of the security market in Shanghai and Shenzhen as well as the need for economic reform, the investment business has moved from its primary stage to advanced operations such as project financing, corporate financing, financial consulting, asset management etc. Taking the security firms as its main body, and trust companies, financial consulting agencies, lawyers and accountants as its part, the investment banking industry of China has formed its own structure. Commercial banks also play part in the business. During the past ten years, the investment banking business has contributed a lot to the development of the security market of China and to the economic reform. Looking to the future, economic development, system transition and upgrading of industry structure are the main three factors that contribute to the vast need for investment banking. Economic development stimulates direct financing. With the booming of Chinese economy in the next century, it can be expected that direct financing will be elevated to higher degree on the financing side. As the intermediate for direct financing, it is no doubt that the investment bank will subject to huge demand. System transition asks for the development of the capital market. As the soul of the capital market, the investment bank will play important roles during the process. And upgrading of industry structure also asks for the service of the investment bank, which is veteran of financing and capital operation. Huge demands ahead, the investment banking business is pressed to have an aggressive development. This is mainly driven by the pressure to adjust the structure of the economy of China. Investment banking will make its way to push the development of the capital market, solve the dilemma for the independence of interests during the reform and resolve the credit crisis and financial risks. Investment banking is also asked to improve the administrative structure of enterprises, rationalize the modern enterprise system and enhance the liquidity of the asset. As to its role in the reform of the SOE, the invest...