Industry Q&A: Hu Zhanghong, CEO, CCB International

Q: What does CCBI currently see as the major areas of opportunity for private equity investment in Greater China?

A: CCBI divides sectors into traditional sectors and newly emerging strategic sectors. Our emerging strategic sectors category includes healthcare; culture and media; internet; alternative energy; traditional energy; and new materials. For the traditional sectors, we cover retail and some manufacturing sectors, such as construction. Altogether we cover 17 sectors.

Q: How does CCBI use its bank origins and network to support its private equity strategy

A: CCB is the third-largest [bank] globally in terms of market capitalization and assets. With this, it has a very rich client network and maintains close relationships with its clients. That is one of the main advantages. Secondly, it gets first-hand information from the clients, so that helps with our risk-management capability.

Lastly, with the large and diverse clientele which CCB has, we are able to value-add through the introduction of strategic partners whom the bank sees as creditworthy partners for the creation of further synergies.

Q: How does CCB International synchronize operations between its different divisions, such as private equity and direct investment, and its other arms, like asset management?

A: First, we all operate under the same legal framework. Everything adheres to strict compliance. And we have a whole value chain of pre-IPO, IPO and post-IPO transactions. But the main purpose of these is ultimately to enhance the value of the companies being targeted, so the whole value chain and the various divisions would work together for this purpose. We also have a big team of professionals which understand the Chinese practice and Chinese corporation culture well.

Q: Does CCB International see a major role in future for specialized sector-focused funds and investments in Greater China?

A: It is the right time for the firm to develop sector funds. Right now, the market size is around RMB200 billion ($29.5 billion), but if you compare this with public equities, you're looking at RMB50 trillion ($7.4 trillion). The PE market cap is RMB200 million. This is at a fast-developing pace if you compare it with credit PE. Going forward, investors would increasingly want to enhance their returns, so this is the right direction for them to go to enhance their development.

Q:Can you comment on the evolution of the RMB fund market?

A: First-class healthcare is something that is going to be the momentum for the growth of Chinese RMB funds. Looking at the domestic growth projections growing so quickly in 2008, and the GDP per capita is now more than $3,000. It is possible for people to get better healthcare and living standards.

The aging population of China shows that we are going to have 200 million people by 2018 who are classed as old-aged. So along with the growth of the aging population in China, that is going to create a lot of opportunities for first-class healthcare.

Second, China is undergoing rapid urbanization, and is expected to reach a level of 65% from the current 46% urbanization rate – this momentum of growth creates a lot of spending from this newly created urban population group. They will not only spend on housing, cars and other necessities to support their new city lifestyle - they will also increasingly seek entertainment and social networking media, and get themselves up-to-date through the media. Hence I expect, going forward, the RMB fund market to develop towards the media and culture sector. 

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• Topics
• Greater China
• Renminbi fund
• Buyout
• Financials
• People