CICC’s Levin Zhu, Son of Former Chinese Premier, Resigns

By Cathy Chan and Fox Hu

Photographer: Jerome Favre/Bloomberg

Levin Zhu, Chief Executive Officer of China International Capital Corp.

Levin Zhu, the son of a former Chinese premier, resigned as chief executive officer of China International Capital Corp., upsetting plans for a Hong Kong initial public offering as early as this quarter.
Zhu, 56, who wrested control of the nation’s first Sino-foreign investment bank from Morgan Stanley 14 years ago, left to seek other opportunities, according to an internal memo obtained by Bloomberg News. Lin Shoukang, a managing director of the firm, will act as CEO while the board searches globally for a replacement, the document shows.
CICC is poised to delay a Hong Kong share sale valuing it at more than $3 billion, people with knowledge of the matter said. Zhu’s resignation comes with
CICC ranked 13th in arranging domestic stock sales this year, slumping from third in 2013, as it loses share to domestic rivals including Citic Securities Co. and Haitong Securities Co.
“CICC is going through a hard time,” said Jiao Wenchao, a Beijing-based analyst at Ping An Securities Co. “An over-reliance on investment banking has become its main weakness as the IPO market remains lukewarm and the company is not positioned for the smaller deals which dominate now.”
The investment bank is yet to seek permission to list from the Hong Kong’s stock exchange, and the lack of a permanent replacement for Zhu could make approval more difficult, two of the people said, asking not to be identified discussing a private process.

CICC’s Challenges

In a letter to employees, posted on news portal Sina.com, Zhu said that his leaving would help the company’s long-term development and “create a smooth transition and succession for the management.” He said he was “passing on the relay baton” to the management team.
Challenges for the firm include a loss of market share in overseas Chinese stock underwriting, its biggest source of fees, from 2012, data compiled by Bloomberg show. Achievements during Zhu’s tenure have included opening offices in New York, London and Singapore.
Zhu is a princeling, the term for children of current or former senior Chinese officials. According to Sina.com, Zhu left Credit Suisse First Boston in the 1990s after the Communist Party banned the children of senior officials from working for foreign companies.

Wang Qishan

Wang Qishan -- today a member of the nation’s seven-man Politburo Standing Committee and formerly the head of China Construction Bank Corp. -- arranged for Zhu, also known as Zhu Yunlai in Chinese, to join CICC in 1998, according to Sina.com.
That was the year Zhu’s father became premier. Zhu began to exert control at CICC in 2000. Morgan Stanley sold its 34 percent stake around December 2010, ending its 15-year involvement in the investment bank and allowing it to later set up its own joint venture. KKR & Co., TPG Capital, Great Eastern Holdings Ltd. and Government of Singapore Investment Corp. bought the stake from Morgan Stanley. (MS)
CICC had planned to start its IPO as early as this quarter, people familiar with the matter said in August. It typically takes more than three months to complete an initial share sale in Hong Kong after a company files a so-called A1 application with the stock exchange.
A CICC spokeswoman in Beijing declined to comment today. Zhu’s office said he wasn’t available.

Premier’s Power

Zhu Rongji, who stepped down in 2003 at the age of 74, shaped the nation’s economic policies for almost two decades. A former mayor of Shanghai and central bank governor, he oversaw China’s entry into the World Trade Organization in 2001 and approved international share sales by state-owned companies.
At CICC, his son forged personal ties with executives to win underwriting assignments from state-owned companies, including China Life Insurance Co. and China Petroleum & Chemical Corp., Asia’s largest oil refiner.
Zhu took a circuitous route to investment banking. After studying at Nanjing Institute of Meteorology in eastern China from 1977 to 1981, he spent two years in Beijing, analyzing global weather patterns at the China Meteorological Administration.
He then moved to the U.S. and received a doctorate from the University of Wisconsin-Madison in 1993. His Ph.D. thesis related to the Indian Ocean’s surface temperature. In 1996, Zhu received a master’s degree in accounting from Chicago’s DePaul University.