China's ICBC Bids for U.S. Entry

China's largest state-owned bank signed an agreement to acquire a majority stake in Bank of East Asia's U.S. subsidiary. It is the first time that China's state owned banks have acquired a U.S. deposit-taking institution. This is interesting given the fact that President Hu Jintao just completed his visit to the U.S.

For years, China has been pressured by the outside world to open up its economy and revalue its currency. Applying Porter's business strategy model, we can see that during past years China has employed a cost strategy to fuel its rise as one of the world's largest economies. For most of its history, China has refused to revalue its currency because the dollar pegged yuan has helped fuel its export market.

The time is coming for China to think about adjusting its strategy. Perhaps the revaluing of the Chinese yuan will prove a catalyst for China in adopting a different strategy- be it a differentiated one or otherwise. Granted, such a change will take time. But the idea is interesting. With growing foreign exchange reserves, primarily U.S. dollars, China faces substantial risks. President Hu's visit, along with other collaborations with U.S. officials indicate that China officials are on the move. It will be interesting to see how the situation plays out within the coming years.