After the Third Plenary Session of the 11th Central Committee of the Communist Party of China was held in December 1978, the financial system reform in China started to speed up. As various financial institutions were re-established and the demand for financial services was diversified, in order to address the contradiction of the People’s Bank of China (“PBC”) for both serving as the monetary policy maker & financial regulator and getting engaged in specific business operation, in September 1983, the State Council officially decided that the PBC would only play the role as the central bank and a new Industrial and Commercial Bank of China would be established to undertake the industrial and commercial credit and savings business previously handled by the PBC. After intensive preparation, on January 1, 1984, Industrial and Commercial Bank of China (ICBC) was officially incorporated, symbolizing the finial setup of the national specialized bank system in China.
i. Background of the establishment of ICBC
Before the reform and opening up, China mainly practiced the highly-centralized planned economic system. Correspondingly, the social investment and financing system was mainly supported by government finance with banks only playing a secondary role in a vertical way of capital distribution. Regarding the financial system, it was basically predominated by the PBC. As the Third Plenary Session of the 11th Central Committee of the CPC was held in December 1978, China rolled out the reform and opening up policy. As the reform and opening up was constantly deepened, China’s economy and society rapidly developed and income of urban and rural residents was gradually increased, raising stronger demand for financial services. The situation was contradictory to the finance-supported and bank-supplemented investment and financing system predominated by one bank back then and it was in urgent need of reform. In October 1979, Deng Xiaoping, chief architect of China’s reform and opening up initiative, proposed the famous assertion that “banks must play the real banking role”, which drew open the curtain of China’s financial system reform. In order to meet the diversified demand for financial services, in 1979, Agricultural Bank of China, Bank of China and People’s Construction Bank of China were re-established one after another. Meanwhile, China International Trust and Investment Corporation was founded and urban and rural credit cooperatives flourished across China. However, a unified and orderly central bank system was not in place yet and China’s financial sector became rudderless amid rampant competition. The PBC back then assumed the dual functions of central bank and specialized bank and after Agricultural Bank of China and Bank of China were re-established, it was still engaged in the two businesses of industrial and commercial credit and urban savings. There used to be a vivid metaphor that the PBC was both the referee and athlete and that it cannot maintain an objective perspective in financial regulation. Driven by their own interests and also due to lack of a complete set of self-discipline mechanisms, specialized banks all scrambled for market by competing to grant loans, causing credit extension to go out of control and affecting the adjustment and development and Chinese economy.
As the financial system reform was gradually deepened, on September 17, 1983, the State Council officially issued the Decision on the People’s Bank of China to Exert the Dedicated Function of Central Bank and proposed that “the People’s Bank of China shall be dedicated to exertion of the function as central bank and not assume the businesses of industrial and commercial credit and savings any more, so as to enhance the centralized management and comprehensive balance of credit capital and better serve the macro-economic decision-makings”. Meanwhile, it decided to “set up Industrial and Commercial Bank of China to undertake the business of industrial and commercial credit and savings previously handled by the People’s Bank of China”.
ii. Intense preparation for the establishment of ICBC
Since the second half of 1983, following the instruction of a series of documents, work on separation of the PBC and Industrial and Commercial Bank of China (ICBC) and transfer of related institutions, businesses and personnel proceeded in order. In October 1983, the PBC approved to set 14 institutions inside the ICBC Head Office with 500 staff members. In the same month, the PBC General Office released the Notice Concerning Some Specific Matters on Adding the Brand-plate of Industrial and Commercial Bank of China to all the provincial, municipal and autonomous regional branches. The Notice clarified that as of January 1, 1984, all provincial, municipal and autonomous regional branches of the PBC and lower-level PBC institutions shall add the brand-plate of Industrial and Commercial Bank of China and adopt the transitional measure of “one institution, two brands; separate capital, two sets of accounts”. In the meantime, the PBC required proceeding ahead with the institution separation step by step and region by region at different levels. Since 1984, the provinces, municipalities and autonomous regions started with the separation move one after another. After one year of active efforts, by the beginning of 1985, except for Qinghai and Hainan (provinces not established yet back then), all the remaining provinces, municipalities and autonomous regions nationwide had fulfilled the task of institutional separation of the PBC and ICBC.
According to the decision of the State Council, the PBC started to transfer the industrial and commercial credit and savings business to the newly incorporated ICBC. By the end of 1983, working capital loans that the PBC transferred to ICBC accounted for 64.6% of the country’s bank working capital loan balance of the same period, fixed asset loans transferred to ICBC accounted for 86.7% of the country’s bank fixed asset loan balance and savings deposits transferred to ICBC accounted for 87.8% of the country’s bank savings deposit balance. Besides, deposit balance of industrial and commercial enterprises transferred to ICBC reached RMB74.558 billion and transfer of related fund accounts was completed as well.
Given that the industrial and commercial credit and savings business of the newly founded ICBC was separated from the PBC, in order to ensure sustained business operation and realize the target of “doing business while building up the bank”, the method of “business goes with the person” was adopted regarding manning of the Head Office leadership. As decided by the State Council, Zhu Tianshun, then the PBC Vice President in charge of credit assumed the post of Chairman of ICBC, Chen Li, the PBC Vice President in charge of savings and accounting took on as the first President and Party Secretary of ICBC and Yin Zhihai, Director of the PBC Savings Bureau, Zhang Xiao, Deputy Director of Industrial and Commercial Credit Bureau, and Tian Tongwu, Director of Technology Bureau, worked as Vice Presidents of ICBC. It was also decided that deputy directors of corresponding business departments and bureaus of the PBC were appointed as department heads of ICBC Head Office. As for staff members of ICBC Head Office departments, they were transferred from related departments and bureaus of the PBC under the coordinated arrangement between the department heads of ICBC Head Office and the PBC department and bureau directors. As for manning of provincial and municipal branch leadership, mostly the First Vice Presidents of the PBC branches in charge of business were appointed as Presidents of ICBC branches and Vice Presidents of the PBC branches in charge of credit, savings, accounting and finance were appointed as Vice Presidents of ICBC branches.
At the juncture of separation of the PBC and ICBC, office space of the PBC at all levels was in short supply. Prior to establishment of the Head Office, ICBC had to seek other office space. After multiple times of coordination, it rented the 2,800m2 workshop lying idle from the 3rd to the 6th floor of a 6-story building newly built by Beijing Xicheng District Clothing Company (currently located at No.32 Yuetan South Street, Sanlihe Road). Because of the tight schedule and heavy task, the only feasible way was to briefly decorate and renovate the idle workshop. With the unremitting efforts of the entire staff day and night, the decoration, renovation and heating supply were completed within only three months, guaranteeing availability of its own office place during the inauguration conference of the ICBC Head Office. People used to joke that the office space of ICBC Head Office was a “rented command center”. Back then, over 200 staff members of the Head Office were crowded in the rented place and dined in the temporary cafeteria in the basement of the clothing company under very hard conditions. Shortly after the establishment of ICBC, business and office conditions of branches and sub-branches at various levels were quite similar to the Head Office and no branch or sub-branch built up any new office building, but make do with whatever is available and focus energy on exploration and development of business.
iii. Official establishment of ICBC
On December 30, 1983, the ICBC inauguration conference was held in Beijing. Leadership officials from the Ministry of Finance, the PBC, Bank of China, Agricultural Bank of China, China Construction Bank and People’s Insurance Company of China attended the meeting. Retired former president of the PBC was also present for congratulation. Vice-Chairmen of the NPC Standing Committee Rong Yiren and State Councilor and Director of State Economic Committee Zhang Jinfu attended the meeting and delivered important speeches. Zhang Jinfu first congratulated the establishment of ICBC on behalf of the State Council. He stressed that “the establishment of ICBC is the product of urban economic and financial system reform. It shoulders the mission of supporting economic development and promoting technological advance and corporate technical renovation. I’m convinced that you will not let down the Party and the people. You will develop rapidly, pooling more funds for national economic development and providing better service for the entire society.” The conference was simple and plain, but in a solemn manner. The small auditorium of Chinese Academy of Sciences was borrowed for the convention of the conference and nearly 300 people from the PBC and ICBC Head Office were present. There was no flower, no souvenir and no banquet, with only several hundreds Yuan spent. Former president Chen Li recalled afterwards: “Business start-up is hard. It is fair enough to be plain and simple. It’s just a pity that we didn’t even prepare any small souvenirs. Only a vague black-and-white photograph of the scene of the conference was left till today.” It was exactly with this hard-working entrepreneurship and thrifty working style that ICBC was born in the reform, starting, growing and prospering.
On January 1, 1984, People’s Daily and Xinhua Daily Telegraph ran news on the inauguration of ICBC. Economic Daily published an editorial titled “An Important Reform of the Banking System” in the front-page headline, congratulating the establishment of ICBC and pointing out that “the establishment of ICBC is a major event in China’s economic work and is an important reform in the banking system”.
iv. Historical significance of the establishment of ICBC
The establishment of ICBC was a symbolic event in China’s financial reform history and was of major historical significance.
First, establishment of the central bank system was the kernel of setting up the two-level banking system including central bank and commercial banks after the reform and opening up in China and also one of the most important achievements in China’s financial system reform. Because of the incorporation of ICBC, the PBC was eventually freed from specific industrial and commercial credit and savings business and fulfilled the leap towards the central bank, realizing the first government-enterprise separation in the banking organizational system of China.
Second, incorporation of ICBC indicated the eventual set-up of China’s national specialized bank system. If we say that re-establishing Agricultural Bank of China and separating Bank of China and China Construction Bank from the PBC after the reform and opening up marks the beginning of the financial organizational system reform, establishment of ICBC drew a perfect full stop for the reform. It’s fair to say that the official birth of ICBC on January 1, 1984 was a symbolic event for the establishment of the central bank system and the eventual formation of the national specialized bank system after New China was founded.
II. ICBC at the Stage of National Specialized Bank
ICBC entered the first decade of national specialized bank after its establishment. It made enormous achievement in the enterprise reform and widely absorbed social capital, fully playing the role of main financing channel. It adhered to the credit principle of “selecting and supporting quality ones” and focused on supporting large and medium-sized state-owned enterprises to actively explore and develop, thus making remarkable progress in deposits, loans and foreign exchange and growing into China’s largest bank. The Bank also expanded credit card, international business and other emerging businesses from scratch, made initial achievement in electronic construction and had its operation benefits constantly improved, admirably fulfilling the government-assigned tasks of macro regulation and policy loans and forcefully supporting the economic development and the reform and opening up policy.
i. Actively implementing the corporation reform centered on invigorating city branches
In October 1984, the 3rd Plenary Session of the 12th CPC Central Committee passed the Decision of the CPC Central Committee on the Economic System Reform, which explicitly proposed that enhancing enterprise vitality was the key link of the economic system reform and identified that promoting the enterprise reform of specialized banks was an important task faced by the entire financial system reform. In January 1986, then State Commission for Restructuring and the People’s Bank of China jointly held in Guangzhou a seminar on piloting financial system reform in five cities including Shenyang, Guangzhou, Chongqing, Wuhan and Changzhou and officially deployed the corporation reform of specialized banks. Later, national specialized banks, including ICBC, started the corporation-oriented management system reform that lasted for nearly ten years. Starting from 1986, ICBC took city branches as the basic business accounting unit to delegate power (six rights including right to business operation, credit fund allocation, interest rate floating, appointment and dismissal of cadres and their rewards and punishment, decision making for labor organizations and form of wage and bonus, disposal of retained profit) and carried out the management system reform centered on invigorating city branches. Regarding the management mechanisms, the Bank made attempts to set up the responsibility constraint mechanism combining power, responsibility and interest and the incentive mechanism in the main forms of “target-oriented operation” and “retained profit” and started to establish the self-disciplined capital management system and the responsibility system for loan risk management. It put into place accounting management foundation and the financial budget system, starting to focus on economic benefit and cost calculating. It also preliminarily shaped the audit management foundation and set up the strict management system and business inspection system. The management mechanisms started to be transformed towards corporation-based ones.
ii. Main businesses rapidly developing and operation benefits constantly improving
At this stage, in response to the financial demand of the fast growing economy, ICBC’s main businesses, including deposits, loans and settlement, rapidly developed with their scope and size swiftly expanded and influence penetrating into all the sectors of national economy in an all-round way. Its capital strength was rapidly augmented and the operation benefits were continuously improved. In the year of its establishment in 1984, ICBC registered deposit balance at RMB169.616 billion, loan balance RMB247.022 billion and profit RMB5.427 billion. After ten years of development, by the end of 1993, ICBC’s balance of various deposits reached RMB884.444 billion, increased by 4.2 times than 1984 at an annual average growth of 20.1%; balance of various loans reached RMB1,112.823 billion, increased by 3.5 times than 1984 at an annual average growth of 18.2%. From 1984 to 1993, ICBC realized a net profit of RMB111.183 billion in total in ten years and annual net profit was averaged at RMB11.118 billion. By the end of 1993, deposit balance of ICBC accounted for 38.1% of the total deposits of the banking industry in China and loan balance 42.1% of the total loans, winning ICBC and maintaining the position as China’s largest bank and making major contribution to the country’s economic development and the reform and opening up.
iii. Number of institutions and personnel continuously increasing and business and office conditions gradually improving
In order to meet the need of the fast economic and social development for banking services, the number of ICBC’s outlets and employees was constantly increased. At the end of 1984, ICBC had 19,199 domestic institutions with 366,200 employees and its original value of property plant and equipment was RMB2.795 billion. By the end of 1993, the number of domestic institutions reached 34,002, increased by 77.1% than the end of 1984; the number of employees reached 554,900, increased by 51.5%. In order to improve its business and office conditions and solve the issue of staff housing, despite the low level of retained profit and the weak financial strength, ICBC managed to build a group of business and office buildings and staff housings by increasing production and cutting down expenses in a coordinated way and put into use a group of transport vehicles, office supplies and electronic equipment. By the end of 1993, the entire Bank’s fixed asset balance (original value) reached RMB22.659 billion, increased by RMB19.864 billion than the end of 1984, or 7.1 times.
Besides, at the stage of specialized bank, ICBC carried out the building of employee team and enterprise culture centered on the “bank style” education and service quality improvement, continuously improving the comprehensive quality of the entire staff. Shortly after its establishment, on the basis of the “iron account books, iron calculation abacus, iron regulations” spirit inherited from the PBC, ICBC creatively put forward the “ICBC Spirit” of “Seeking Truth and Innovation, Working hard and Enduring Hardships, Paying Attention to Interests of the Whole, Forging Ahead in Solidarity” in line with practice. It also built up the unified corporate image identification system and formed the carrier of enterprise culture building. At the following stage of corporation operation, ICBC adhered to the concept of “high operation benefits, high asset quality, high bank reputation” and promoted the entire Bank to gradually cultivate the working style and conduct code of being careful & precise, honest & trustworthy, innovative & progressive and pragmatic & ethical, forcefully driving the transformation towards a commercial bank.
III. ICBC at the Stage of State-owned Commercial Bank
From 1994 to 2004, ICBC was at the stage of state-owned commercial bank. After the adjustment period following the transformation from a state specialized bank to a state-owned commercial bank, starting from 2000, ICBC accelerated the reform towards a commercial bank, proposed and stuck to the guideline of “benefit, quality, development, management, innovation”, focused on quality benefit, comprehensively strengthened management and enhanced discipline across the Bank, driving its operation management concept to be fundamentally changed and making major breakthrough in the reform and development. It established the new-type operation management system centered on two categories of indicators including quality and benefit, promoted the asset quality and operation benefit of the entire Bank to be fundamentally improved and made admirable achievements in capital strength, business innovation, cross-national operation, information-based capacity-building, institutional reform, internal control and risk management, laying a solid foundation for the stock system reform later.
i. Taking the lead to adopt the unified legal person system and constructing an operation and management system of modern commercial bank
Since 1993, China continued to deepen reform and open wider to the outside according to the reform objective and basic framework requirement of building up the socialist market economic system. In December 1993, the State Council released the Decision on the Financial System Reform, putting forward a new round of reform targets and measures themed on improving and rectifying the financial order. As policy finance and commercial finance were separated, state specialized banks, including ICBC, started to transform towards state-owned commercial banks. According to related provisions of the Law of the People’s Republic of China on Commercial Banks promulgated in 1995 and the requirements for commercialized and intensive operation and management, ICBC took the lead among its peers to practice the unified legal person system, popularized the subsidiary monitoring mode of “managing one lower level and monitoring two lower levels”, put into place and improved systems for centralized authorization and credit, capital management, credit risk control, comprehensive assessment for operation and management, all-round cost management and internal control and gradually shaped a customer-centered marketing management mechanism. It continued to accelerate the electronic construction and information-based building and after the “9991 Program” was successfully concluded, it realized the centralized management and real-time monitoring of the whole system by the Head Office.
ii. Concentrating on digesting non-performing assets, with asset quality fundamentally improved
At this stage, ICBC took prevention and disposal of asset risk as primary task in operation and management and implemented the strategy of loan access and exit. It substantially adjusted the credit structure, drew a clear line between new and old loans, strictly controlled quality of incremental loans, actively prevented deterioration of stock assets, made great efforts to reduce non-performing loans and strived to digest non-credit non-performing assets. From 1999 to 2000, according to the centralized deployment of government, ICBC was accumulatively stripped off RMB407.7 billion non-performing assets and debt swapped to equity to China Huarong Asset Management Co., Ltd. With on-balance-sheet interest receivable and normal loan factors in the debt-to-equity swap deducted, ICBC was actually stripped off non-performing loan principal RMB294.2 billion. From 2000 to 2004, with the support of national policies and the great efforts it made, ICBC resorted to the operation benefit of its own to recover and digest tremendous non-performing assets and realized “dual decreases” in balance and rate of non-performing loans. According to the five-level categorized management standard for loan quality, by the end of 2004, ICBC’s rate of non-performing loans was already reduced to 18.99%, down 28.6 percentage points than the peak 47.59% in 1999. Since 1999, ICBC constantly kept its rate of incremental non-performing loans under 1.6%, reaching the sound level set for international commercial banks.
iii. Persisting with business exploration and innovation, with operation benefit noticeably improved
At the stage of state-owned commercial bank, ICBC actively expanded quality business markets, maintained the momentum of rapid growth in both deposits and loans and made breakthrough in intermediary business. It continued to promote the cross-national operation strategy, set up ICBC (Asia) Co., Ltd and Industrial and Commercial East Asia Finance Holdings Ltd, realized rapid development in overseas institutions and business and greatly improved the operation benefit of international business. By comprehensively implementing the brand strategy, it established the Peony Card business. Meanwhile, in line with the operation requirements for modern commercial banks, ICBC streamlined its institutions and employees by a large margin with the purpose of further improving the operation benefit. In order to meet the need of transferring the focus of business modes to customers, in accordance with the requirement for rebuilding business and management procedures, ICBC adjusted the setting of internal institutions of the Head Office and subsidiaries at all levels. In 2000, ICBC reversed the operating loss that had been lasting for six consecutive years and started to make operating profit that grew year by year. By 2004, ICBC domestic and overseas institutions realized operating profit RMB74.6 billion and accumulatively realized operating profit RMB227.7 billion in five years, with annual operating profit averaged at RMB45.5 billion.
iv. Operation structure undergoing positive changes, with main businesses maintaining the leading position amid domestic peers
At the stage of state-owned commercial bank, ICBC made active adjustment, had its assets, liabilities and income structure considerably changed and promoted the implementation of the strategic transformation of its operation structure and mode. Regarding the asset structure, the previous pattern of credit assets taking a predominant position was changed and the share of non-credit assets in total assets was gradually increased. In terms of liabilities structure, passive liabilities still held a dominant position, but active liabilities already started to grow. As for income structure, the profiting mode of solely relying on credit spread income was greatly changed. While the proportion of income from intermediary business, investment in bonds and capital transactions was constantly increased, that of interest spread income slightly dropped.
By the end of 2004, total assets and total liabilities of ICBC accounted for 17.95% and 18.15% of the total of the domestic banking industry respectively. To be specific, balance of RMB deposits accounted for 19.91% of the total in the domestic banking industry and balance of RMB loans 19.46%. In 2004, the value of import and export settlement processed by ICBC reached USD177.53 billion, accounting for 21.24% of the total settlement value of state-owned commercial banks (including ICBC, Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications). In 2004, ICBC issued 111 million bank cards, taking up 14.49% of the bank card issuance amount by financial institutions across the country and accounting for 10.57% of the bank card transaction value of the year. At the end of the year, RMB deposit balance of the ICBC bank cards reached RMB294.223 billion, accounting for 19.23% of the total of financial institutions nationwide. As the largest commercial bank in China, ICBC was among the top 500 worldwide. In the rating by international authoritative media and institutions such as The Banker, Euromoney, Global Finance and Asiamoney, ICBC was named the “Best Bank of China”, “Retail Bank of China”, “Personal Online Banking of China” and “Trade Project Financing Bank of Asia”, starting to build up the admirable image of an internationalized large bank.
Moreover, regarding employee team building and enterprise cultural building, ICBC proactively stood up to the challenges of economic and financial globalization and building of a modern commercial bank and focused on the overall picture of the economic and financial work and the general requirements of its own reform and development. It made great efforts to enhance building of leadership and cadre teams, implemented the “100, 1,000 and 10,000” talent program, explored to establish the market-based human resource management mechanism and organized systematic employee trainings at different levels in a large scope. ICBC paid attention to the enterprise cultural building centered on people, service and reputation and highlighted the mass theoretical study. On the basis of proposing and sticking to the guideline of “benefit, quality, development, management, innovation”, it shaped the “Five Concepts” and cultivated the “Six Spirits”, gradually fostering an enterprise spirit and operation concept with ICBC characteristics.
IV. Historic Transformation to a Joint-stock Commercial Bank
In line with the opportunities and challenges faced by the financial industry since China’s entry into WTO, starting from 2002, ICBC made intensive preparations for the joint-stock reform. In April 2005, Chinese government approved ICBC’s joint-stock reform plan and financial restructuring of the Bank was initiated accordingly. In October, Industrial and Commercial Bank of China Limited was officially incorporated. In October 2006, ICBC shares were openly traded both at home and abroad and ICBC was successfully listed in both Shanghai and Hong Kong, making a thorough change in its development history.
i. Financial restructuring smoothly implemented
In December 2001, China officially joined WTO, which drew open the curtain of opening up and economic system reform in a broader field and at a deeper level. In the face of opportunities and challenges presented by fully opening up the financial sector, China’s banking industry shouldered the primary task of seizing the valuable five years in the transition period after the WTO entry to accelerate its own reform and development. In September 2003, the State Council Leading Group on the Pilot Work for Joint-stock Reform of State-solely-owned Commercial Banks was set up. In October, the 3rd Plenary Session of the 16th CPC Central Committee passed the Decision of the CPC Central Committee on Improving Several Issues Concerning the Socialist Market Economic System, which explicitly proposed selecting eligible state-owned commercial banks to implement the joint-stock reform, accelerate disposal of non-performing assets, enrich capital and create conditions for going public. On April 18, 2005, Chinese government officially approved the joint-stock reform plan of ICBC and the Bank’s reform was officially launched, with financial restructuring entering a substantial stage accordingly. The financial restructuring of ICBC included recapitalization and disposal of non-performing assets, with the former proceeding in the two forms of state capital injection and subordinated debenture issuance. On April 21, by mobilizing foreign exchange reserve through Central Huijin Investment Ltd., Chinese government injected USD15 billion (equivalent to RMB124 billion) capital to ICBC. Meanwhile, the Ministry of Finance retained the originally allocated RMB124 billion capital in equivalence to the amount of Central Huijin Investment Ltd. as capital of ICBC, making ICBC’s core capital reach RMB248 billion and core capital adequacy ratio 6%. In order to supplement tier 2 capital, further improve its capital structure and increase capital adequacy ratio, in August of the same year, ICBC successfully issued the first round of RMB35 billion subordinated debentures in the form of setting up underwriting group. At the same time of recapitalization, ICBC deployed and implemented the second round of non-performing asset stripping. Thanks to the support and coordination of related government departments and with meticulous arrangement made across the entire Bank, ICBC eventually fulfilled the RMB246 billion loss assets stripping off and the transfer of RMB459 billion doubtful loans.
ii. Industrial and Commercial Bank of China Limited officially incorporated
After intense preparations, on October 25, 2005, the Inauguration Meeting of Industrial and Commercial Bank of China Limited & the First Shareholders’ Meeting, the First Meeting of the First Board of Directors and the First Meeting of the First Board of Supervisors were held in Beijing. At the conference, the new Articles of Association (draft) and the Rule of Procedure for Shareholder’s Meeting, Board of Directors and Board of Supervisors (draft) were passed, the first Board of Directors and Board of Supervisors were elected, senior management personnel were appointed and a standardized corporate governance structure was preliminarily established. Name of the Bank was changed from Industrial and Commercial Bank of China to Industrial and Commercial Bank of China Limited (“ICBC”) after the reform. The first Board of Directors elected Jiang Jianqing as Chairman of Industrial and Commercial Bank of China Limited and Yang Kaisheng as Deputy Chairman and President. The first Board of Supervisors elected Wang Weiqiang as Chairman of the Board of Supervisors. Meanwhile, ICBC finalized the legal formalities for setting up a joint-stock company and the timing for holding the inauguration meeting of the joint-stock company had come.
According to the decision of the State Council and as approved by China Banking Regulatory Commission, Industrial and Commercial Bank of China Limited was officially incorporated on October 28, 2005. On the afternoon of the day, the inauguration meeting & unveiling ceremony was held in Beijing. The meeting was chaired by President Yang Kaisheng. The PBC governor Zhou Xiaochuan and ICBC Chairman Jiang Jianqing conducted the unveiling part. After the ceremony, governor Zhou Xiaochuan, deputy finance minister Li Yong and Chairman Jiang Jianqing delivered speeches. A total of 1,000 people including member institutions of the Leading Group on the Joint-stock Reform of State-solely-owned Commercial Banks, domestic and foreign financial peers, intermediary agencies, members of ICBC Board of Directors, Board of Supervisors and senior management, heads and employee representatives of ICBC branches and departments and representatives of retired leadership and employees attended the inauguration meeting.
All the businesses, assets, liabilities, institutional outlets and employees of ICBC were included into the scope of the joint-stock reform and entirely entered the joint-stock company after overall restructuring. The establishment of Industrial and Commercial Bank of China Limited symbolized another thorough transformation of ICBC.
iii. Successfully introducing domestic and foreign strategic investors
Introducing qualified domestic and overseas strategic investors, promoting diversification of the equity structure and further improving and rationalizing the corporate governance mechanism were an important step of ICBC’s joint-stock reform. ICBC paid great attention to introducing strategic investors, set up Strategic Investment Promotion Working Group led by the Head Office Joint-stock Reform Office, made massive preparations and conducted wide and in-depth contact with potential strategic investors. After comprehensive balancing and hard negotiations, ICBC eventually identified Goldman Sachs Investment Group consisting of Goldman Sachs Group, Allianz Group and American Express as strategic investor. On January 27, 2006, ICBC and Goldman Sachs Investment Group signed the agreement on strategic investment and cooperation in Beijing. According to the agreement, Goldman Sachs Investment Group would invest USD3.78 billion to buy into ICBC. Afterwards, ICBC successfully introduced the National Council for Social Security Fund as its shareholder. On June 19, ICBC and the Council signed the agreement on strategic investment and cooperation. The successful introduction of Goldman Sachs Investment Group and National Council for Social Security Fund was one of the major achievements of ICBC’s restructuring and laid a solid foundation for the Bank to go public and enter the international capital market.
iv. Being successfully listed in Shanghai and Hong Kong
From March to October 2006, ICBC made massive preparations for its IPO. On March 22, the preparation working conference for ICBC going public was held, indicating the official kick-off of the preparation work. On June 29, the selection meeting for ICBC A-share lead underwriter was convened. On July 20, the kick-off meeting for ICBC A-share issuance was held. Since the mid July, the plan on simultaneous trading of ICBC A+H shares was submitted for approval. In September, ICBC completed the examination and disclosure of prospectus and consequently started domestic and overseas roadshows. From the end of September to the mid October, ICBC management was divided into three roadshow teams namely Red, Blue and Orange, which were headed by Chairman Jiang Jianqing, President Yang Kaisheng and Vice President Li Xiaopeng respectively, to launch the pre-roadshow and roadshow activities both at home and abroad. Overseas roadshows lasted for nine days and covered 18 important cities in Asia, Europe and the US. On October 18 Beijing time, ICBC’s three roadshow teams conducted the high-profile online roadshow in Los Angeles, Amsterdam and Beijing respectively at the same time, which was the first time for Chinese companies to launch online roadshows in three cities inside and outside China simultaneously. In the process of the roadshows, investors showed a positive attitude, were satisfied with ICBC’s presentations of materials and professional performance of its management and generally believed that as a leading enterprise in Chinese banking industry, ICBC was outstanding in risk management and prudent in operation. They showed great interest in subscribing ICBC shares and quite a few investors expressed the wish for cooperating with ICBC.
Amid the admirable atmosphere of the successful roadshows, on October 16, 2006, ICBC shares started to be offered publicly among mainland and Hon Kong public investors and were actively subscribed by institutional and retail investors in the two markets. A-share online issuance locked over RMB650 billion funds, a record high in the history of A-share online fund locking. On the first day of the public offering in Hong Kong, the subscription was quite heated and the project became the offering project with the largest number of subscribers (number of applications) in the history of Hong Kong. It attracted nearly HKD425 billion funds (equivalent to USD54.6 billion), the largest amount of blocked funds among public offerings in Hong Kong in history. As the roadshows were successfully concluded, on October 20, ICBC held the working video-conference on IPO pricing and placement of shares in Beijing, Hong Kong and San Francisco simultaneously and the work on share pricing and placement kicked off accordingly. On this basis, ICBC decided to get listed on both Shanghai Stock Exchange and Stock Exchange of Hong Kong Ltd. On October 23, the Bank selected the stock code for listing in Shanghai and Hong Kong, 601398 for A-shares and 1398 for H-shares, and identified the simplified Chinese name “工商银行” and simplified English name “ICBC”. On October 27, ICBC was successfully listed in both Shanghai and Hong Kong, becoming a pioneer in simultaneous A+H shares listing. Calculating based on the corresponding market value of ICBC A-share closing price and H-share closing price on the day of listing, after the A-shares and H-shares adopted green shoe in full amount, total market value of A+H shares reached USD141.9 billion, driving ICBC up to the fifth position in the ranking of global listed banks. The IPO of ICBC set multiple records in the history of capital market and rewrote 28 records, thus reputed as the “IPO of the Century” at the time.
During the period of the joint-stock reform and IPO, entire ICBC staff carried forward the essence of outstanding enterprise culture with unique characteristics, constantly made breakthrough and improved their core competitiveness, thus shaping the joint-stock reform spirit of “solidarity, big-picture consciousness, selfless contribution, carefulness and pragmatism, courage for innovation”. Having endured the global financial crisis in 2008, ICBC had grown into one of the internationalized large banks with the highest market value, highest profit and best growth. Today, as the objective and vision of building up a global leading bank with the best profitability, performance and prestige became increasingly clear and the value of “Integrity Leads to Prosperity” was basically rooted, ICBC has preliminarily constructed its own enterprise cultural system.
V. The Decade of “Golden Development” after the Share Reform and Listing of the Bank
The 2005-2014 period was the first decade of the Bank’s transformation after its share reform and listing. With gradual implementation of the transformation and development strategy, ICBC basically optimized its operation structure and reformed its management system, embracing the “golden decade’ of rapid development since its founding, and preliminarily exploring a development path with its own characteristics.
1. Continuously improving the modern corporate governance system Upon completion of the share reform and its listing, the Bank established a modern corporate governance structure consisting of the shareholders’ general meeting, the board of directors, the board of supervisors and the senior management. Meanwhile, the Bank continued to optimize modern corporate governance system, improved the system and mechanism for information disclosure management, formulated a series of rules and regulations (including the articles of association; the rules of procedure for the shareholders’ general meeting, the board of directors and the board of supervisors; the work rules of the special committees under the board of directors and the board of supervisors; specifications such as the plan on the authorization of the shareholders’ general meeting to the board of directors and the plan on the authorization of the board of directors to the President of the Bank), made due adjustment thereto according to regulatory requirements and practical needs, and further clarified the duties and responsibilities of the regulatory, decision-making, supervisory and executive institutions. During this decade, ICBC made remarkable achievements in corporate governance, winning full acknowledgement and high praise from regulators, capital markets and the public. By studying and exploring the capital market, the Bank also established and improved the investor relations and direct investment management policies, with relevant work mechanisms gradually standardized and executed effectively, allowing it to gain a lead over its domestic peers and receiving extensive recognition of both domestic and overseas capital market. Underpinned by its continuously leading operating results, the Bank saw its refinancing capability and international influence notably enhanced.
2. Deepening the reform of management systems and mechanism The Bank implemented strategic transformation-oriented institutional reforms and process improvement. In 2005-2014, to meet strategic demand for transformation and development, ICBC continuously pressed ahead with organizational adjustment and reform, deepened business process restructuring, and boosted operational efficiency and service quality; launched and promoted the project of optimizing the layout of the domestic institutional network, and set up a clearly-layered and highly-efficient global financial service network system with varied channels and rational positioning by seizing opportunities and gradually improving the layout of the overseas institutional network. By the end of 2014, the Bank set up 338 institutions in 41 countries and regions, expanded its service coverage to 20 African countries by holding equity interest in Standard Bank Group, and established correspondent bank relationship with 1,809 foreign banks in 147 countries and regions.
The Bank advanced a market-oriented management system reform. Since its share reform and listing, ICBC has been taking a market-oriented approach to reform the credit approval system and improve the credit operation and management system with a view to risk control; reengineered and optimized the asset and liability management framework, and comprehensively deepened the reform of centralized management of full funds; put in a place a complete and uniform product innovation management system; established a modern financial & accounting management system, and an intensive and uniform value-based operation management system; reformed the Group’s legal risk management system, and stepped up protection of consumer rights; pressed ahead with service-oriented transformation of the Group’s security management system, thus laying a favorable foundation for the adjustment and transformation of its operational structure and development model.
The Bank further improved the risk and internal control management system. In 2005-2014, ICBC, according to the risk management requirements for modern commercial banks, established and improved the management system for balance sheet consolidation risk and country-specific risk, and gradually put in place a reputation risk management system for the purpose of establishing and improving the all-round risk management organizational structure and mechanism of the Group; consistently advanced the building and application of the risk quantification system, and carried through the operation principles of capital constraints and balance between risk and return; innovated in the internal audit system and developed the internal control and compliance management system; built the Group-wide market risk management system and improved its market risk management, laying an effective foundation for the smooth implementation of the Bank’s operational transformation strategy.
3. Promoting major adjustments to the operation structure and model The Bank actively and prudently pressed ahead with its internationalized operations. The 2005-2014 period was the “golden decade” for the rapid internationalization of ICBC. with its internationalization strategy increasingly optimized during this period, , the Bank basically completed the layout of its overseas institutions, realized robust development of its domestic international business, made breakthroughs in correspondent bank services, and witnessed its cross-border RMB business starting from scratch, which laid a solid foundation for internationalized development. After ten years of exploration, the Bank figured out a path for international development that suited itself and had the unique characteristics of the era, achieving remarkable results in the development history of the financial industry of New China, and contributing significantly to its growth into a world leading bank.
The Bank steadily proceeded with diversified operations. After its share reform and listing, ICBC forged ahead with diversified operations through innovation. By adapting itself to market demand, the Bank consistently improved its diversified operation strategy and pressed ahead in a vigorous and prudent manner. Through ten years of efforts, the Bank basically established a cross-market and diversified integrated financial services platform, thus forming a development pattern for mutual benefit of its diversified business. The Bank’s subsidiaries including ICBC Credit Suisse Asset Management, ICBC Financial Leasing, ICBC International and ICBC-AXA saw their business scale keep growing and contributions to the Group’s profit rise continuously. The Bank witnessed its capacity for sustainable development gradually growing, as major progress was made in the reform of the profit center, and a profit-making pattern underpinned by “branches + specialized product lines” was basically formed.
The Bank continued with the optimization of the structure of assets, liabilities and earnings. After its share reform and listing, ICBC established an unconventional development strategy for non-credit businesses, and continuously proceeded with the adjustment of the asset and liability structure. During the ten years, the Bank saws its total assets and liabilities grow steadily and rapidly, and interbank business develop robustly, with asset structure optimized continuously, customer deposits staying basically stable and various businesses maintaining a rapid growth momentum. To develop a diversified and balanced profit-making pattern, the Bank actively implemented the strategy of adjusting its income structure, and substantially raised the share of income from non-credit interest spreads. Through a decade of operations and development, the Bank witnessed its profit surge and became the world’s most profitable bank, with profit sources increasingly diversified, and a sustainably growing profit pattern forming gradually.
The Bank strengthened capital and asset quality management. Since the share reform in 2005 and then listing, ICBC has adhered to the strategy of transformation and development, continuously strengthened capital management and improved various capital management measures in response to changes in the macroeconomic, financial and regulatory environments after the international financial crisis; implemented an all-round risk management strategy that met the needs for the Group’s transformation and development, reinforced risk control in key areas, and stabilized the credit asset quality through a raft of measures. With unremitting efforts, the Bank saw its net capital rise year by year, and capital adequacy ratio remain at a high level for years in a row compared with its domestic and foreign peers. Since 2013, the Bank’s tier 1 capital has topped all comparable banks across the world; both the balance of NPLs and NPL ratio gradually declining, and loan quality leading over its global peers.
The Bank tapped into the potential of regional development. At the beginning of its share reform and listing, ICBC came up with the regional development strategy of stepping up the expansion of urban markets, according to the new features of China’s regional economic development and the national strategic plan for regional development. On the basis of thorough research and assessment, the Bank continued to improve its regional development strategy and the path for implementation. Given the new changes in profit growth of branches after the outbreak of the global financial crisis, the Bank proposed and implemented the profit echelon strategy among its branches to change the situation of a single profit source structure by region and enhance the competitiveness of core and key competition areas. After 2009, the Bank carried out two rounds of reform on the banking departments of provincial (regional) branches and key county-level sub-branches with a view to boosting the competitiveness of operating units and saw the market competitiveness of relevant branches and sub-branches rise notably.
The Bank accelerated the consolidation and optimization of its channel structure. During 2005-2014, ICBC adhered to the strategic transformation of its operation structure and model, formulated a series of channel development plans, optimized the channel structure, actively developed new channels and steadily advanced intensive operation, gradually figuring out a channel development model and path with its own characteristics. This allowed it to set up a multilayered and three-dimensional marketing service channel system with the four major channels, namely outlets, self-service banking, e-banking and customer managers, collaborating with and complementing one another. During the ten years, the Bank saw its e-banking service system improve continuously, service functions increasingly complete; physical channel layout optimized, operation and service efficiency enhanced gradually and operating profit rise notably; and the customer manager team grow continuously, with a further optimized structure.
4. All-round development of businesses The Bank pressed ahead with the transformation and development of the corporate banking business. Over the ten years, to adapt to the changing external environment and customer demands, ICBC kept improving the Head Office/branch layered and collaborative marketing system, innovated in the new interaction and development model for the special financing product line business and commercial banking, and gradually established a specialized, international and market-driven development path for the corporate banking business. In 2013, the Bank implemented the “big corporate banking” strategy and created a “customer manager + product manager + service solution” integrated service model by grasping the financial service needs of different types of customers. Moreover, the Bank explored a specialized financing model for modern commercial banking at a faster pace, expanded the financing market through internationalization, and boosted the competitiveness of special financing products by taking a market-oriented approach, gradually establishing four specialized lines (i.e. aircraft financing, ship financing, global syndication and export buyer’s credit); created a new model for “interaction between commercial and investment banking”, enriched and formed an investment banking product system, with the layout of domestic and overseas investment banking business increasingly complete.
The Bank diversified the layers for the development of the institutional banking business. ICBC continuously consolidated the “bank-bank, bank-securities and bank-insurance” cooperation, deepened bank-government cooperation, cemented the advantages of bank-military cooperation, strengthened financial services for the improvement of people’s livelihood, and promoted innovation in interbank cooperation. Moreover, the Bank actively supported the national strategy for the development of agricultural finance, built a bank-bank platform, diversified agricultural finance products and innovated in financial service models for rural areas. In an active response to the government’s call for vigorously cultivating a modern capital market, the Bank promoted the model of bank-securities cooperation through the third-party depositary service for securities funds, and achieved win-win results for bank-securities cooperation by means of product innovation, channel complementation and customer sharing. By seizing the opportunity for bank-insurance cooperation, the Bank cemented the foundation for agency business, expanded the business scope of bank-insurance cooperation, and created cooperation opportunities with the insurance industry in the areas of fund clearing, value preservation and appreciation, fund custody and equity cooperation, effectively deepening such cooperation. Meanwhile, the Bank cooperated with the reform of the treasury payment system, assisted with the collection and payment of non-tax revenue and the finance-taxation-treasury-bank reform, and continuously sought new drivers for bank-government cooperation through informatized development of banks. By fully understanding the needs of military clients, the Bank consistently cemented the advantage of bank-military cooperation and enhanced bank-military friendship with premium financial services and products. Since 2012, the Bank formulated and implemented the strategy of “all-institutional banking”, seized market opportunities by orienting itself to the needs of institutional customers, and established a new service model for such customers that featured uniform management, integrated services and work division and collaboration.
The Bank innovated in the development model of retail banking business. By actively adapting itself to changing socioeconomic environments and demand, ICBC pushed forward with the transformation of its retail business, successively came up with and implemented the strategies of “big personal banking”, “strong personal banking” and “big retail”, establishing itself as a dominant player in the retail banking area. By firmly seizing the opportunities brought by China’s economic growth and increase in residents’ wealth, the Bank boosted the market competitiveness of retail business with a view to boost its integrated service capacity, and gradually established a big retail development pattern which catered to customer needs, and featured information resources sharing, marketing service coordination and product consolidation. Moreover, the Bank vigorously advanced the clustered development of personal banking business, improved the financing services and products system for small and micro enterprises, continuously optimized and innovated in retail banking products to expand and strengthen the retail business. The Bank established a profit model for its retail business through multiple product lines including savings deposits, asset management, small and micro enterprise financial business, private banking and credit card, and continuously facilitated the healthy development of its retail business.
The Bank promoted leap-frog development of its asset management business. According to the developments and changes in economic and financial markets, and regulatory environments, as well as diversified, personalized, electronized and integrated customer needs, ICBC put forth and fully implemented the “big asset management” strategy and advanced the adjustment and transformation of its operation model and structure by means of state-of-the-art information technologies. Since its share reform and listing, the Bank strove to upgrade its settlement & cash management business, and actively implemented the branding strategy; vigorously developed the franchise wealth management business and maintained its leading position in the sector by improving organization management and innovating in the investment model; reformed operation management to secure a constant lead over its peers in asset custody business; developed and strengthened the pension business by starting with the enterprise annuity business.
The Bank reinforced the foundation for financial markets business. ICBC comprehensively utilized various financial tools including interest rate, exchange rate and commodities to meet customers’ diversified financial needs, and enhanced its own core competitiveness and integrated service levels through investing and financing operations and transactions of funds denominated in local and foreign currencies in both domestic and overseas financial markets, underwriting and offering direct financing instruments. Since the reform of the profitability units in 2010, the Bank saw its financial markets business maintain a rapid and stable development trend, and continued to boost the profitability of the financial markets business line by scientifically optimizing the investment portfolio structure, carrying out innovation in products and operation models, strengthening the organization and promotion of product lines, and improving its comprehensive business support capacity, which played a significant role in promoting reforms and development bank-wide.
5. Consistently improving the infrastructure and operation support system The Bank continued focusing on information-based development. After its share reform and listing, ICBC proceeded with information-based development at a faster pace, improved the product innovation management model, and revitalized operation through product innovation to deal with complex and changing internal and external business situations, and promote bank-wide operation transformation. The Bank consistently improved information system operation and infrastructure construction, pressed ahead with R&D projects and business innovations adapted to transformation and development requirements and internal and external regulatory environments, advocated the application of big data, established a technological framework for future business development, and optimized the technology management organizational system and management mechanism. By centering on the objectives of its transformation and development strategy and business development plan, the Bank prompted the shift from information-orientated development for itself to the building of an information-based bank, and made new progress and breakthroughs in technology infrastructure construction, production and operation management, development of applications and technology management. Moreover, by reinforcing the building of the monitoring, emergency response and disaster recovery systems, the Bank enhanced its automated management level, and ensured smooth business development and operation management bank-wide. The Bank sought to establish a complete information technology protection system and enhanced its information security control capability on all fronts; set up a data warehouse system and continuously expanded the application of such data warehouse; implemented precision marketing and improved risk management; innovated in the building of the Group’s information platform, launched into operation a global information platform, developed and promoted the office informatization system platform, and strengthened standardized use of information.
The Bank worked vigorously to build an outstanding culture as a financial enterprise. ICBC pressed consistently ahead with the building of a modern financial enterprise culture with unique characteristics; continued to improve the brand management system and facilitate the rise of its brand value and influence. Moreover, the Bank saw the initial formation of a corporate culture system in the new era by adhering to historical heritages based on the background of the times, with the value of “Integrity Leads to Prosperity” becoming its spiritual pillar. Efforts were stepped up to build the system to punish and prevent corruption, actively foster the culture of integrity, and strengthen the accountability mechanism for supervision and discipline enforcement, so as to create a good atmosphere that advocates cleanness and honesty, and lay a solid disciplinary and work style foundation for the Bank’s transformation and development. Furthermore, the Bank, being employee-centered, launched the selection of “Touching ICBC”, employee caring program and other themed educational activities, fully mobilized its employees and gave play to their role as a major force for its development; optimized the grassroots democracy management system, reinforced the building of labor union organizations, strengthened and improved the management of retired employees. By enriching the meaning of responsibility and improving relevant work mechanisms, the Bank put in place a relatively complete social responsibility management and implementation system, so as to fully and properly perform its economic and social responsibilities and let all stakeholders and the society share in its reform and development achievements, as it was on track to become a world-leading modern financial enterprise.