carrot.jpgThree foreign banks are set to make a paper profit of $5.7bn from the forthcoming flotation of Chinese bank ICBC, the world's biggest IPO. But these core investors won't be able to cash in their gains for some time.

Apart from the customary lock-in clause — in this case a lengthy three years — Goldman Sachs, Allianz and American Express are being held to wide-ranging training and partnership commitments with ICBC, according to the Financial Times ($).

Goldman Sachs' agreement is the most far-reaching and stretches for five years into the future. Under its agreement with ICBC, the US investment bank will host at least 50 ICBC executives for three to six-month training programmes.

The training initiatives are just “one segment of hundreds of different projects that are going on,” according to an insider quoted by the FT.

China has long tried to get western companies to commit more than just money to their investments in the PRC. In the case of hi-tech JVs,the agreements typically require some type of technology transfer, although western companies are uneasy about sharing IPRs with Chinese partners and increasingly will try to go it alone in China.

In the banking sector, technology transfer isn't relevant, so ICBC has come up with an alternative mechanism for extracting more than funds from its foreign partners. And obviously it makes a lot of sense for ICBC which urgently needs to brush up its skill base it it is to transform itself into a dynamic and modern banking giant.

Western companies looking to invest in other industries in China could perhaps try dangling this carrot of education as it strikes me as a much less problematic area for cooperation than technology transfer.

Background to the flotation in this earlier EngagingChina story. The past week has seen blanket coverage of the ICBC's flotation in all the world's media, including this surprisingly uncritical leader in the UK's Guardian. The left-leaning 'paper sees the flotation as “symbolic of a big step in China's passage from command economy to modern market-based state.”

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