One Billion Customers - James McGregor [39]
Another major question was the relationship between CICC and Morgan Stanley’s other Asian operations, including Hong Kong. Wadsworth planned to integrate the China investment banking operations in his Hong Kong office into CICC, and he expected CICC to include Morgan Stanley in many, if not all, of the deals it would do with Chinese companies. But Wang was reluctant. He envisioned CICC as an independent entity that should be able to partner with any firm it wished on specific deals and not be Morgan Stanley’s stepchild. Competition among foreign investment banks to partner with CICC on deals would be good for CICC, he said. Wadsworth relented, but still expected that Morgan Stanley would be in on the lion’s share of CICC’s deals.
Then there was the matter of compensation. As the CEO of China Construction Bank, Wang Qishan had an annual salary of about $20,000. Even the lowliest of the Morgan Stanley executives that might be expected to join CICC would be paid at least ten times that amount and the senior executives would be earning one million dollars or more. Wang wasn’t worried about the differential between his salary and what the Americans who would work for him would be paid. After all, there were many perks besides money for a senior government executive like himself and he had long known about the ridiculous sums paid to American financiers.
Even as he was negotiating the basic operating structure of CICC with Wang Qishan, Jack Wadsworth found himself in the unaccustomed position of having to simultaneously negotiate with Morgan Stanley’s powerful partners back in New York. Big things were happening in the United States. Inflation was falling and corporate earnings were rising. Investors were throwing money at the stock market and technology stocks were rapidly becoming the belles of the Wall Street ball. Real-estate prices in New York, Boston, and San Francisco were soaring. The great American bull market of the 1990s was just beginning to run. Morgan Stanley’s focus was on America and Wadsworth was having an unusually difficult time convincing the senior partners that he was on to something really big. Nobody was thinking much about China except for Morgan Stanley CEO John Mack. Mack had long admired and respected Wadsworth’s abilities. He shared Jack’s vision of China becoming a bonanza for Morgan Stanley. Together the two lobbied the firm’s senior management to support the joint venture.
Wadsworth’s basic argument was simple: If the joint venture failed, Morgan Stanley would lose the $35 million it had invested for its 35 percent stake. But if it was successful, the fee income would be enormous and, once China opened up to the world at large, Morgan Stanley could either buy the venture from its partner or sell its stake. The risk was paltry, he argued, compared to the potential rewards.
Part of the difficulty Wadsworth faced in New York came directly from his Hong Kong colleagues’ sabotage efforts. Like most international banks, Morgan Stanley has regional managers like Wadsworth in major financial capitals. But the people who work in those capitals trading stocks and bonds, making loans, and underwriting stock and bond offerings report directly to whoever is in charge of their respective specialties back in global headquarters. The regional manager’s job is to build client and government relations, help land the big deals, keep the offices in his region running smoothly, and be the eyes and ears in the area for headquarters.
When China was all but closed, many foreigners had concluded that Hong Kong was the ideal observation post from which to monitor and do what little business there was to be done with China. Executives and officials in Hong Kong made no effort to disabuse them of that notion. The Chinese working in Hong Kong