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David Li from United Bank of Switzerland (UBS) thinks that golden age for foreign investment banks in China has not come to the end. He also gave advices for the investment banks about knowing China.
As the leader of UBS China and UBS Securities, David Li kept his low profile. He used to be a professional football player and took his MBA from the Wharton School of the University of Pennsylvania. He once served in Citibank and Hong Kong Merchants International. Then he joined in UBS. Every turn of his role has been sealed by features of the age. Let’s quote one of his words: “I am lucky to live in such an exciting age.”
Ten years ago, David Li gave up his position and high salaries in Citibank and returned to China. He and the other financial elites from the Wall Street pulled up the curtain of surging capital market in China. Then, Goldman Sachs and UBS got into China, starting the golden age of foreign investment banks in China.
However, from 2009 many foreign investment banks saw their joint ventures in China suffer depression. The disputes about shareholding, the quit of senior executives and the stagnant business tortured them. They lost the place in the IPO. In the first seven months of 2010, none of them has attended the IPO in the yuan-denominated A-share market which totaled 198. Take UBS Securities for example. Though it has finished several refinancing programs, it only undertook two IPOs in the first ten months of 2010.
In July, Henry Cai resigned from the president of UBS Asia, raising the concerns about whether UBS can keep its leading place in Asia. The past year was apparently a challenge for David Li and UBS he served.
David Li didn’t think that the golden for foreign investment banks has been ended. In his opinion, the foreign investment banks need to: a), comprehend the market, b), comprehend the principle, c), to know the specialties of different time.
He thought that the booming investment business accompanied by the age of “big orders” was unique to China. For UBS, the system is important than people. Therefore, UBS has clear strategy in China. “It is of no concern with human resources. It lies in the proper system.”
Changes for Foreign Investment Banks
According to David Li, before he jointed in UBS in 2005, the European company has the plan of acquiring China’s local securities companies and establish China as one of its bases. The dream came true in 2006 with his team’s efforts.
“That year, we acquired Beijing Securities and founded UBS Securities based on the company. However, nothing from Beijing Securities was left, including debts, resources and management pattern. UBS Securities is a new company.”
“I don’t think the year of 2005 is the start of a golden age for the foreign investment banks in China. It belongs to the history. Actually, I think the next 30 years in China are also a golden age, if no catastrophic hazards and political unrest happened. As I said: ‘I am lucky to live in such an exciting age’.”
David Li’s conclusion is based on the factors as follows:
One: urbanization which will promote the drastic increase of domestic demand; two: industrial upgrade which will increase the production capacity of China as a big manufacturing power; third: internationalization which can not be avoided and can bring a lot of opportunities; fourth: the pursuit for wealth which derives from people’s heart after being sealed for one hundred years.
David Li admitted that the age of “big orders” has been ended as major state-owned enterprises got listed. But IPO undertaking is only a part of investment banks’ business. “In the past few years, our major business was to help Chinese companies go public. It is the same for our rivals. Mergers, reorganizations, acquisitions, second offering and stock trade also take a big part of our business. In the matured, the IPO only takes a small part of investment banks’ business.”
“In China, the IPO collecting multi-billion yuan is quite rare. Most of the IPOs collect 3-4 billion yuan. There are still a lot of companies in China.”
The matured bond market is usually multiply bigger than the stock market. China’s bond market has a huge space for development. The financial market includes stock market, bond market, currency market and future market. Each market plays its own role. UBS should get balance in all these markets instead of focusing on one market.
David Li also thinks that the rise of domestic securities companies pose a big threat for UBS. When the second board was launched in 2009, the domestic companies acted very actively. In comparison, foreigners seemed to be retarded.
David attributed this to the periodical adjustment. “The investment team of UBS China started to work in 2007. At that time, we only had dozens of people. We also had some big undertakings, which spared no time and people for us to pay attention to the second board. As our team grows bigger, we plan to move parts of our force to the second board. In my opinion, using all our power to finish some important tasks can help us establish brand image more efficiently.”
When talking about the rise of the banking securities dealers represented by Guo Kai Securities, David Li said: “the impact is inevitable since banks have their own advantages in products and customers. But how to make use of advantages is another matter. The customers have no different demands and they want the best services.”
Comprehension of the Domestic Market
In David Li’s opinion, comprehending the Chinese market means that knowing the rules and principles. “We should not be confused by temporary success of failure. We must find the principles and follow them.”
“The big orders are related with the large SOEs in China. However, there are only about 50 large SOEs in China. When they all went public, the age of “big orders” came to end. The investment banks must calm down and try to find how many orders are there left for us. We must know how to get and carry out these orders.”
Recently, Morgan Stanley and Citibank are busy seeking new partners. It seems that the foreign investment banks still counted on the joint ventures. For this, David Li said: “I think that the foreign investment banks never reduced their passion into China’s market. The active A-share market in China is a big pie for them. Since there are rules about upper limit of a foreign investment in a joint venture, they have to find more and more partners to enhance their power.”
“The joint ventures can learn a lot from their parent companies, most of which have gone through one hundred years’ development. Their rich experience and preciseness in consolidating its platform can help China to establish a more professional and regular financial market.”
How UBS Builds Its Platform?
It is known that UBS is enhancing its team power, which is considered as a strategic change. David Li didn’t oppose this saying. “A good securities dealer marks its success in many fields. Research and development (R&D) is an important matter. The power of R&D can reflect the closeness of a company with the capital. Strong R&D power can attract more customers. Previously we are restricted by our insufficient R&D team, which was initially trained to provide services for overseas funds. That leads to the unfamiliarity with the Chinese market. Therefore, we think that we can get close to the Chinese market and increase the R&D power to a level matching our strength and reputation.”
“I hope we can make out a first-class R&D team having profound study in the companies listed in the A-share market. Presently, we lay emphasis on several leading industries in China and then spread our arms to all industries. In addition, we have to care about the compatibility between our R&D team and sales team. A judgment is needed for the market orientation – how to make a market dominated by private investors to the one taken by institutional investors. We note that some big insurance and financial companies have already joined in the competition, which will become more furious in the future.”
David Li didn’t agree with the point that UBS focused on investment banking business too much in China in the past years. “This is a misunderstanding of our strategy in China. The business of assets management and financing is as important as the investment banking business. They are all our core businesses.”
“I think the misunderstanding is due to the impressive performance of our Investment Banking Development (IBD) in the past two years. The IBD is the earliest department set up in China. We deployed strong power in this department and soon got fast development after getting several big orders. IBD contributed a lot to company’s development at the beginning. But now the other businesses also saw fast development, which gradually caught up with the investment banking business.”
Human resources is another important factor for UBS to build its power in China. As David Li introduced, UBS China is like a well-oiled and perfectly designed machine with the different posts as the components. Therefore, if one component broke, they just need to find a proper one to replace it. David Li didn’t believe that someone’s resignation can bring fatal damages to the company. But UBS still commits itself to attracting and keeping the most talented people.
How UBS Succeeds in China?
David Li divided UBS’ development in China into several phases. “From the beginning to now, UBS’ primary task is to establish a foundation and to build a team. Following is the period of getting close to the market and enabling the different departments to earn profits. Meanwhile, we should make UBS more like a system. Cultural integration is also a problem. We have workers from different countries. How to combine them needs careful consideration. In addition, we need to think about how to turn our Beijing branch into a corporation bank as quickly as possible.”
“We should obey all the rules in China and build a system for sharing inside resources. We will hold some regular conferences on different matters and enhance the communication among different branches in China and the information exchange between our Chinese branches and the ones in the overseas market.”
“The Chinese market will be more attractive in the next three years. It is growing at a fast pace in market structure, products and competitors. Therefore, new opportunities will come out with new contradictions emerging too. For the foreign investments, how to understand the changes and how to make use of these changes is the key for success.”
“The next three years are very important for UBS. When our departments of securities, banks and assets management all enter the Chinese market as independent institutions, they have to face several changes. On one hand, how to integrate these platforms to provide all-directional services for the Chinese market? On the other hand, how can we find our own main competitive power when our friends and rivals are growing?” said David Li.
As the leader of UBS China and UBS Securities, David Li kept his low profile. He used to be a professional football player and took his MBA from the Wharton School of the University of Pennsylvania. He once served in Citibank and Hong Kong Merchants International. Then he joined in UBS. Every turn of his role has been sealed by features of the age. Let’s quote one of his words: “I am lucky to live in such an exciting age.”
Ten years ago, David Li gave up his position and high salaries in Citibank and returned to China. He and the other financial elites from the Wall Street pulled up the curtain of surging capital market in China. Then, Goldman Sachs and UBS got into China, starting the golden age of foreign investment banks in China.
However, from 2009 many foreign investment banks saw their joint ventures in China suffer depression. The disputes about shareholding, the quit of senior executives and the stagnant business tortured them. They lost the place in the IPO. In the first seven months of 2010, none of them has attended the IPO in the yuan-denominated A-share market which totaled 198. Take UBS Securities for example. Though it has finished several refinancing programs, it only undertook two IPOs in the first ten months of 2010.
In July, Henry Cai resigned from the president of UBS Asia, raising the concerns about whether UBS can keep its leading place in Asia. The past year was apparently a challenge for David Li and UBS he served.
David Li didn’t think that the golden for foreign investment banks has been ended. In his opinion, the foreign investment banks need to: a), comprehend the market, b), comprehend the principle, c), to know the specialties of different time.
He thought that the booming investment business accompanied by the age of “big orders” was unique to China. For UBS, the system is important than people. Therefore, UBS has clear strategy in China. “It is of no concern with human resources. It lies in the proper system.”
Changes for Foreign Investment Banks
According to David Li, before he jointed in UBS in 2005, the European company has the plan of acquiring China’s local securities companies and establish China as one of its bases. The dream came true in 2006 with his team’s efforts.
“That year, we acquired Beijing Securities and founded UBS Securities based on the company. However, nothing from Beijing Securities was left, including debts, resources and management pattern. UBS Securities is a new company.”
“I don’t think the year of 2005 is the start of a golden age for the foreign investment banks in China. It belongs to the history. Actually, I think the next 30 years in China are also a golden age, if no catastrophic hazards and political unrest happened. As I said: ‘I am lucky to live in such an exciting age’.”
David Li’s conclusion is based on the factors as follows:
One: urbanization which will promote the drastic increase of domestic demand; two: industrial upgrade which will increase the production capacity of China as a big manufacturing power; third: internationalization which can not be avoided and can bring a lot of opportunities; fourth: the pursuit for wealth which derives from people’s heart after being sealed for one hundred years.
David Li admitted that the age of “big orders” has been ended as major state-owned enterprises got listed. But IPO undertaking is only a part of investment banks’ business. “In the past few years, our major business was to help Chinese companies go public. It is the same for our rivals. Mergers, reorganizations, acquisitions, second offering and stock trade also take a big part of our business. In the matured, the IPO only takes a small part of investment banks’ business.”
“In China, the IPO collecting multi-billion yuan is quite rare. Most of the IPOs collect 3-4 billion yuan. There are still a lot of companies in China.”
The matured bond market is usually multiply bigger than the stock market. China’s bond market has a huge space for development. The financial market includes stock market, bond market, currency market and future market. Each market plays its own role. UBS should get balance in all these markets instead of focusing on one market.
David Li also thinks that the rise of domestic securities companies pose a big threat for UBS. When the second board was launched in 2009, the domestic companies acted very actively. In comparison, foreigners seemed to be retarded.
David attributed this to the periodical adjustment. “The investment team of UBS China started to work in 2007. At that time, we only had dozens of people. We also had some big undertakings, which spared no time and people for us to pay attention to the second board. As our team grows bigger, we plan to move parts of our force to the second board. In my opinion, using all our power to finish some important tasks can help us establish brand image more efficiently.”
When talking about the rise of the banking securities dealers represented by Guo Kai Securities, David Li said: “the impact is inevitable since banks have their own advantages in products and customers. But how to make use of advantages is another matter. The customers have no different demands and they want the best services.”
Comprehension of the Domestic Market
In David Li’s opinion, comprehending the Chinese market means that knowing the rules and principles. “We should not be confused by temporary success of failure. We must find the principles and follow them.”
“The big orders are related with the large SOEs in China. However, there are only about 50 large SOEs in China. When they all went public, the age of “big orders” came to end. The investment banks must calm down and try to find how many orders are there left for us. We must know how to get and carry out these orders.”
Recently, Morgan Stanley and Citibank are busy seeking new partners. It seems that the foreign investment banks still counted on the joint ventures. For this, David Li said: “I think that the foreign investment banks never reduced their passion into China’s market. The active A-share market in China is a big pie for them. Since there are rules about upper limit of a foreign investment in a joint venture, they have to find more and more partners to enhance their power.”
“The joint ventures can learn a lot from their parent companies, most of which have gone through one hundred years’ development. Their rich experience and preciseness in consolidating its platform can help China to establish a more professional and regular financial market.”
How UBS Builds Its Platform?
It is known that UBS is enhancing its team power, which is considered as a strategic change. David Li didn’t oppose this saying. “A good securities dealer marks its success in many fields. Research and development (R&D) is an important matter. The power of R&D can reflect the closeness of a company with the capital. Strong R&D power can attract more customers. Previously we are restricted by our insufficient R&D team, which was initially trained to provide services for overseas funds. That leads to the unfamiliarity with the Chinese market. Therefore, we think that we can get close to the Chinese market and increase the R&D power to a level matching our strength and reputation.”
“I hope we can make out a first-class R&D team having profound study in the companies listed in the A-share market. Presently, we lay emphasis on several leading industries in China and then spread our arms to all industries. In addition, we have to care about the compatibility between our R&D team and sales team. A judgment is needed for the market orientation – how to make a market dominated by private investors to the one taken by institutional investors. We note that some big insurance and financial companies have already joined in the competition, which will become more furious in the future.”
David Li didn’t agree with the point that UBS focused on investment banking business too much in China in the past years. “This is a misunderstanding of our strategy in China. The business of assets management and financing is as important as the investment banking business. They are all our core businesses.”
“I think the misunderstanding is due to the impressive performance of our Investment Banking Development (IBD) in the past two years. The IBD is the earliest department set up in China. We deployed strong power in this department and soon got fast development after getting several big orders. IBD contributed a lot to company’s development at the beginning. But now the other businesses also saw fast development, which gradually caught up with the investment banking business.”
Human resources is another important factor for UBS to build its power in China. As David Li introduced, UBS China is like a well-oiled and perfectly designed machine with the different posts as the components. Therefore, if one component broke, they just need to find a proper one to replace it. David Li didn’t believe that someone’s resignation can bring fatal damages to the company. But UBS still commits itself to attracting and keeping the most talented people.
How UBS Succeeds in China?
David Li divided UBS’ development in China into several phases. “From the beginning to now, UBS’ primary task is to establish a foundation and to build a team. Following is the period of getting close to the market and enabling the different departments to earn profits. Meanwhile, we should make UBS more like a system. Cultural integration is also a problem. We have workers from different countries. How to combine them needs careful consideration. In addition, we need to think about how to turn our Beijing branch into a corporation bank as quickly as possible.”
“We should obey all the rules in China and build a system for sharing inside resources. We will hold some regular conferences on different matters and enhance the communication among different branches in China and the information exchange between our Chinese branches and the ones in the overseas market.”
“The Chinese market will be more attractive in the next three years. It is growing at a fast pace in market structure, products and competitors. Therefore, new opportunities will come out with new contradictions emerging too. For the foreign investments, how to understand the changes and how to make use of these changes is the key for success.”
“The next three years are very important for UBS. When our departments of securities, banks and assets management all enter the Chinese market as independent institutions, they have to face several changes. On one hand, how to integrate these platforms to provide all-directional services for the Chinese market? On the other hand, how can we find our own main competitive power when our friends and rivals are growing?” said David Li.