See attached article on Wall Street's Excellent Adventure in China.
So on one hand unionists are being thrown in psychiatric hospitals while Merrill Lynch is getting the franchise for IPOs as the Chinese state enterprises are being put up for global capitalist bid.
It just puzzles me that anyone on the Left sees opposing this authoritatian capitalist nightmare as a bad thing. This is not about "powerful countries condemning less powerful countries", since the powerful elites are applauding this activity. That those elites are also ignoring human rights condemnations of the US are to be expected as well. So what?
The point is to organize and agitate to put pressure on capitalist elites in both the US and China to respect union rights. Why people think we can't do both is beyond me.
-- Nathan Newman
December 17, 2000 Wall St. Goes Hunting for Treasure in China By MARK LANDLER
HONG KONG -- Four years ago, Goldman, Sachs & Company gathered a group of Chinese government officials at a resort on Hainan, a tropical island in the South China Sea. Under the solicitous gaze of a star Goldman investment banker, John L. Thornton, the bureaucrats were fed, cosseted, and given a primer on how to privatize their vast state-owned corporations.
It is a long way from Hainan to the arctic cold of wintertime Beijing. But as Mr. Thornton, now the president and co-chief operating officer of Goldman, waited there last Wednesday to meet with officials at the China Telecommunications Corporation, he must have hoped that at least a few of the functionaries remembered the palm fronds and fruity cocktails.
Goldman is one of six firms - three American, two Chinese and one European - invited to bid for the right to manage the initial public offering of China Telecom, the country's flagship telephone company.
With 130 million customers, 185 million phone lines and $24 billion in sales, China Telecom is one of the prize steeds in China's corporate stable. An initial stock offering in Hong Kong and New York could reap $5 billion to $10 billion, generating fees of $150 million to $300 million for the underwriter.
"This will be one of the last great I.P.O.'s to come out of China for a while," said Duncan Clark, a former banker at Morgan Stanley who runs BDA China Ltd., his own telecommunications consulting firm in Beijing. "It's a huge deal, but it needs to be handled very delicately."
No wonder that the bankers from Goldman, Morgan Stanley Dean Witter, Merrill Lynch, UBS Warburg, the China International Capital Corporation and Bank of China International were milling restlessly in the lobby of China Telecom's headquarters, waiting to be summoned upstairs.
The meetings, which consisted of 40- minute presentations followed by 20 minutes of questions by company executives, are part of a ritual known as a beauty contest. Initial offerings from Silicon Valley to the City of London are awarded this way. In China, though, there is nothing beautiful about it.
The winner of the China Telecom deal will have traversed a financial, bureaucratic and political gantlet. It will have persuaded Beijing that it can carve a competitive company out of the lumpy remnants of China's communications monopoly. It will promise to sell that company to a jittery market at a time when telephone companies rank just behind Internet start-ups on the list of spurned stocks.
Most frustrating, it will be plunged into the byzantine politics of Beijing, where business deals are still awarded as much on connections - known in Chinese as guanxi - as on merit. Nobody talks about the compromises that foreign banks make in China, but nobody doubts that they compromise.
When the winner is chosen, perhaps by this week, it will scarcely have time to uncork the Champagne or fire up the Cuban cigars.
"Major China deals are extremely demanding," said a former banker at Goldman, who spoke on condition of anonymity. "They require flawless execution and endless patience. Lots of young bankers will work around the clock for the next six months and never get any appreciation from the client."
Still, top-drawer firms like Goldman, Morgan and Merrill expend untold resources and considerable prestige to land these assignments. Morgan and Merrill have also held plush conferences for Chinese officials.
The president of Morgan Stanley, John J. Mack, and the chairman of Merrill Lynch International, Winthrop H. Smith Jr., were in Beijing last week to lead their delegations. Mr. Smith's father was the first chairman of Merrill - the kind of pedigree that appeals to China's officials.
On major global offerings, American firms also agree to share equal billing with a Chinese partner - typically China International Capital - even though they do most of the heavy lifting.
"Investment bankers could make more money doing other deals," said T. K. Chang, a partner in the Hong Kong office of the Coudert Brothers law firm. "But these assignments pay off over time in terms of prestige and a franchise."
The franchise, Mr. Chang said, lies in helping Beijing overhaul its bloated corporate sector by whipping the best companies into shape and selling them to globally minded investors. China Telecom is the latest of a string of initial offerings that began in 1997 with the cellular giant China Mobile.
So far, China's mega-offerings have been in two industries - telecommunications and petroleum. And two firms, Goldman and Morgan, have reaped most of the bounty. Goldman handled the $4.2 billion of China Mobile offering, as well as a $3 billion offering of PetroChina, the No. 1 oil company.
Morgan Stanley raised $5.6 billion for China Unicom, the No. 2 cellular provider, and $3.5 billion from an offering of Sinopec, the No. 2 oil company. Goldman and Merrill shared a $7.6 billion secondary offering of China Mobile last month that was the largest Chinese stock deal ever.
China International Capital, or C.I.C.C., was a co-manager on most of those deals. The firm, a joint venture of Morgan Stanley and the China Construction Bank, is a symbol of Beijing's efforts to build a domestic investment banking industry. One of its most influential employees - in practice if not in title - is Levin Zhu Yunlai, the son of China's prime minister, Zhu Rongji. Mr. Clark, of the consulting firm, said that "one of the key things in these deals is how the book is built, how the shares are allocated among brokers."
"The role of C.I.C.C. is to take care of friends of Beijing," he added.
In handicapping the race for China Telecom, the allegiances of China International Capital are crucial. The firm has had an often turbulent relationship with its partner, Morgan Stanley. Those strains led China International to use its ties in Beijing to promote Goldman for the first China Mobile offering.
China International has since teamed up with Morgan, however, on two other offerings. And bankers involved in this deal said the two had struck an informal alliance in preparing for this bid.
Goldman's pitch hinges on its strong record in taking Chinese companies public. But the firm's past successes may count against it, according to one banker, because of the principle of "distributive justice." In other words, the Chinese government may want to spread the wealth.
That leaves Merrill Lynch as an obvious candidate. After its muscular performance on the secondary offering of China Mobile, the firm believes that it deserves an initial offering of its own. (UBS Warburg, which only recently built an investment banking franchise in Asia, is widely viewed as an also-ran.)
In a hostile market, Merrill's sprawling retail brokerage system could be a good way to place shares. Merrill has also completed big deals for NTT of Japan and Hutchison Whampoa of Hong Kong. But bankers involved in the pitch said Merrill lacked the political connections, or guanxi, of Goldman and Morgan.
"At one time, guanxi was sufficient to win deals," Mr. Clark said. "Then it became necessary but not sufficient. Now, we're between that phase and the time when guanxi will no longer be necessary."
Whether Merrill Lynch can make China Telecom more than a two-horse race may say as much about the evolution of China as it does about Merrill.