Citic Securities
Project Proposal
--------------FIN4060 China Finance
Background
In October 2008, the Chairman Larry Yung disclosed that the firm lost HK$15 billion (US$2 billion) due to "unauthorized trades". The unauthorized trades were hedges with a contract value of AUD 9 billion against the Australian dollar, taken out to cover against an AUD 1.6 billion prospective acquisition and capital expenditure. . After this controversy, in December 2008, CITIC Group injected assets into CITIC Pacific through issuance of convertible bond and increased its equity interest in CITIC Pacific to approximately 57.56%. Rong Zhijian, former Chairman of the board of CITIC Pacific, resigned in April 2009.
The 2008 foreign exchange losses controversy terminated the history of CITIC Pacific as an SOE operated by Rong’s family as individuals. During the past twenty years, Rong has operated CITIC Pacific to be an independent kingdom. However, for CITIC Group and Chinese government, Pacific, being a channel of financing, is expected to be more transparent and conversant.
Being “the last red-hat family”, Rong Zhijian and Rong’s family he represents is watched with all interest by the public. The change of relationship between Rong’s family, CITIC and Chinese government, the development and fate of Rong’s family and CITIC is always a hot topic.
Objectives
Based on the case of CITIC Group and CITIC Pacific, we will explore the development of the special mode of share holding and of management. Conflicts of interests incurred between an influential manager and government as a shareholder to an SOE in this mode when it develops to a certain stage and in a certain business environment will be emphasized. Prediction of future prospects and possible transformation of this mode, applicable also to other SOEs in this mode, will be provided.
Outline
1. Introduction of CITIC Pacific and Rong’s family to see how was CITIC Pacific developed as an SOE operated by Rong’s
--------------FIN4060 China Finance
Background
In October 2008, the Chairman Larry Yung disclosed that the firm lost HK$15 billion (US$2 billion) due to "unauthorized trades". The unauthorized trades were hedges with a contract value of AUD 9 billion against the Australian dollar, taken out to cover against an AUD 1.6 billion prospective acquisition and capital expenditure. . After this controversy, in December 2008, CITIC Group injected assets into CITIC Pacific through issuance of convertible bond and increased its equity interest in CITIC Pacific to approximately 57.56%. Rong Zhijian, former Chairman of the board of CITIC Pacific, resigned in April 2009.
The 2008 foreign exchange losses controversy terminated the history of CITIC Pacific as an SOE operated by Rong’s family as individuals. During the past twenty years, Rong has operated CITIC Pacific to be an independent kingdom. However, for CITIC Group and Chinese government, Pacific, being a channel of financing, is expected to be more transparent and conversant.
Being “the last red-hat family”, Rong Zhijian and Rong’s family he represents is watched with all interest by the public. The change of relationship between Rong’s family, CITIC and Chinese government, the development and fate of Rong’s family and CITIC is always a hot topic.
Objectives
Based on the case of CITIC Group and CITIC Pacific, we will explore the development of the special mode of share holding and of management. Conflicts of interests incurred between an influential manager and government as a shareholder to an SOE in this mode when it develops to a certain stage and in a certain business environment will be emphasized. Prediction of future prospects and possible transformation of this mode, applicable also to other SOEs in this mode, will be provided.
Outline
1. Introduction of CITIC Pacific and Rong’s family to see how was CITIC Pacific developed as an SOE operated by Rong’s