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Wanguo Securities: A Story about a Broken Dream


Wanguo Securities Co. (now known as Shenyin and Wanguo Securities Co.) was incorporated in 1988 as one of the first securities firms in China, organized as a corporation in the real sense (in contrast with Southern

Shift in Revenue Structure in the CITIC Securities Industry Source: Wind Information Co.

FIGURE 1.12 Shift in Revenue Structure in the CITIC Securities Industry Source: Wind Information Co.

Securities and Haitong Securities). Shanghai International Trust and Investment Corp. plus another nine shareholders invested CNY 35 million in the company. Guan Jinsheng acted in the capacity of general manager, at age 41. From the outset, Wanguo Securities had pursued a goal to become the Chinese Merrill Lynch.

Within two months after incorporation, the company made a successful debut as the first Chinese securities firm in the international securities industry. In an underwriters group of more than 20 international securities firms gathered to underwrite the Euroyen bond issued in London by BNL (Singapore Branch), Nomura Securities was the director general and Wanguo Securities was deputy director general.

Wanguo Securities completed its primitive accumulation of capital from reselling Treasury bonds. When the Chinese Government started to issue Treasury bonds in 1981, their lack of liquidity made them very unpopular. Many local authorities required a compulsory purchase order. This allowed some buyers to acquire Treasury bonds at a low price in the underground market. Some companies even accepted Treasury bonds in the sale of overstock merchandise with a disguised discount. In March 1988, the Ministry of Finance released the Pilot Implementation Scheme for an Open Market for the Transfer of Treasury Bonds, allowing for the open market trading of Treasury bonds in Shanghai, Shenzhen, Wuhan, and another 51 cities. At that time, Wanguo Securities, with fewer than 20 employees, went out buying Treasury bonds. In 1989, Wanguo Securities realized a turnover of CNY 300 million, topping all other securities firms. Arbitrage in Treasury bonds constituted the major part of its business.

In 1992, Wanguo Securities, together with China New Tech Venture Investment Corp. and Cheung Kong Holdings Ltd., acquired a 51 percent stake in the Public International Ltd., a listed company in the Hong Kong Stock Exchange, to become the first Chinese mainland securities firm that had successfully completed a purchase of a listed company in Hong Kong. In 1993, Wanguo Securities had an AAA credit rating—the only broker with such a rating in China. In 1994, the company contributed 22 percent (in A shares) and 50 percent (in B shares) of the total trading volume of the Shanghai Stock Exchange. It was also the domestic lead underwriter for 8 out of 12 companies that went public in the B-shares market. Meanwhile, Wanguo Securities had set up branch offices in Singapore and London, and was also preparing for a U.S. branch office.

Wanguo Securities also played an indispensable role in the creation and development of the Shanghai Stock Exchange. It was the first securities firm that developed trading rules, offered offsite trading services in Shenzhen and Shanghai stock exchanges, and promoted and adopted paperless trading in China. Wanguo's constructive suggestions even resulted in many securities market regulatory provisions.

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