People’s Republic of China: Equity Investment in Bank of China | Asian Development Bank

People’s Republic of China: Equity Investment in Bank of China

Evaluation Document | 27 December 2012

Assesses ADB's direct equity investment in the Bank of China, in response to the government's plan to liberalize the finance sector and to support banking sector reforms in the country.

Liberalizing the banking sector has been high on the reform agenda of the People's Republic of China. To assist in this process, the Asian Development Bank (ADB) in 2005 approved a $75 million equity investment in the Bank of China (BOC) representing 0.24% ownership. In 2006, the BOC was successfully listed on the Hong Kong, China and Shanghai stock exchanges, becoming the second large commercial bank in the People's Republic of China to go public. ADB's investment was designed to provide support to corporate governance, credit and risk management, and the implementation of banking safeguards at the BOC. ADB sold 40% of its shares in 2011 for $106.9 million, and divested the balance a year later for $128.9 million.

The performance evaluation report rates the project as successful overall. ADB's investment helped improve governance and management at the BOC and boost investor confidence in the bank before and after the listing. In addition, ADB's participation encouraged better links with international organizations and in applying international banking standards.

The project's business success is rated excellent. The BOC's assets more than doubled during ADB's investment period, and the bank is now a market leader in international settlements and trade finance. In terms of additionality, however, ADB's role is rated less than satisfactory.

ADB played only a minimal role overall and stronger governance within the BOC would likely have taken place without ADB. Its investment was too small to have an impact, and it was not in the position to stipulate changes in policies or operations, although its presence brought added confidence and necessary assurance for the BOC's initial public offering.

"Perhaps in future projects, ADB could have more influence by investing an amount sufficient to secure a seat on the board," says the evaluation study, adding that future investments in large banks may indeed not be possible due to the size of investment needed to qualify for a board seat.

"One lesson from the project would be to seek investment opportunities in smaller commercial banks - perhaps city commercial banks would allow greater influence on policies and lending," says the report. It adds that ADB could then encourage more lending for low-carbon and infrastructure projects and to small and medium-sized enterprises and local governments, within "more clearly defined and focused areas."


  • Acknowledgements
  • Basic Data
  • Executive Summary
  • Chapter 1: The Project
  • Chapter 2: Evaluation
  • Chapter 3: Issues, Lessons and Recommendations
  • Appendixes