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HONG KONG: In the 1980s, when Hank Greenberg, then chairman of American International Group, the US insurer, paid $515,000 to return to Beijing a set of brass windows looted from the Imperial Palace in the 19th century, few observers expressed surprise.
Extravagant gifts, lavish entertainment of companies and government officials, and a huge amount of patience have traditionally been the key attributes for companies wishing to do business in China's state-controlled markets.
Over the past few years, international investment banks competing to advise on the multi-billion dollar listings of the country's largest corporate groups have repeatedly been forced to call upon those qualities.
In China's Byzantine system, Wall Street firms pitching for a deal have never had the luxury of waiting for the western-style "beauty parade" of advisers a few months before an initial public offering (IPO).
"Chinese IPOs have always been won or lost several years before the beauty parade," says a senior China banker.
"If you do not have the right contacts at company and government level years before, then you have no chance." ,
But the landmark US$8.0 Hong Kong offering of China Construction Bank (CCB), which closed on October 20 after strong investor demand, turned those certainties on their head.
In the turbulent run-up to deal, CCB forced out one of its two advisers, Citigroup, giving Morgan Stanley, the other, hope that it would have the IPO and its considerable fees of about US$200m to itself - only to appoint a second adviser, Credit Suisse First Boston, less than two months before the launch of the deal.
Many observers believe the topsy-turvy events surrounding CCB's IPO could herald a radical change in the competitive landscape with long relationships and connections becoming less important in the winning of deals mandates.
People close to the CCB deal say that, although Morgan Stanley had been working with the bank for years, CSFB successfully argued that having another underwriter would make it easier to sell such a large deal.
"CSFB was chosen because of its distribution capabilities and because the 1PO was too important to be left to one underwriter alone, albeit a very capable one," says a person close to CCB.
Sceptics point out that CSFB will receive a lower portion of fees than Morgan Stanley and that it had to offer to buy a $500m stake in CCB in order to be even considered as a potential adviser.
The Chinese lender eventually declined CSFB's offer because it would have delayed the offering, but there are fears that Chinese banks will see a stake purchase as a necessary condition for would-be foreign advisers.
Yet, with CCB's strategy vindicated by the success of its IPO, which was priced towards the top of its targeted range, investment bankers hope other large Chinese companies will use a more transparent system for appointing advisers.
Indeed, several firms believe they have a shot at advising on the listing of Industrial and Commercial Bank of China, the country's largest, despite the fact that the lender has a long relationship with CSFB and that Goldman Sachs is to buy a stake.
Their hopes may well be dashed but at least they did not have to dip into the looted windows' market in order to compete in China.
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