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A farmer drives a tractor past a branch of Agricultural Bank of China in Xiangfan, Hubei province July 1, 2010. Agricultural Bank of China's Hong Kong share offering has been more than 10 times oversubscribed by institutional investors, signalling healthy interest in the dual listing that could end up being the world's largest ever. REUTERS/Stringer (CHINA - Tags: BUSINESS) CHINA OUT. NO COMMERCIAL OR EDITORIAL SALES IN CHINA (� Stringer Shanghai / Reuters/� Stringer Shanghai / Reuters/R)
A farmer drives a tractor past a branch of Agricultural Bank of China in Xiangfan, Hubei province July 1, 2010. Agricultural Bank of China's Hong Kong share offering has been more than 10 times oversubscribed by institutional investors, signalling healthy interest in the dual listing that could end up being the world's largest ever. REUTERS/Stringer (CHINA - Tags: BUSINESS) CHINA OUT. NO COMMERCIAL OR EDITORIAL SALES IN CHINA (� Stringer Shanghai / Reuters/� Stringer Shanghai / Reuters/R)

Is Wall Street chasing the dragon? Add to ...

Morgan Stanley chief executive officer James Gorman wasn't going to miss his chance.

It didn't matter that he was on holiday. Mr. Gorman dropped everything and flew to Beijing last April. He wanted to show up in person to make sure his firm got a piece of what was shaping up to be the biggest initial public offering in history.

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In Beijing, Mr. Gorman spent hours rehearsing with his team for a half-hour pitch to executives of Agricultural Bank of China, whose IPO would eventually raise $22-billion.

"For a half-hour bake-off, he came all that way," Wei Christianson, Morgan Stanley's China CEO, said in an interview last month from her office near Financial Street in Beijing.

As he practiced, the Australian-born CEO debated with colleagues about whether the Chinese bankers would want to hear his stories about farming in the outback.

Mr. Gorman was not the only top Wall Street executive looking to get in on the AgBank deal. JPMorgan CEO Jamie Dimon and Deutschebank CEO Josef Ackermann also went to China to make their pitch, and in the end all three banks secured an underwriting assignment for the bank's Hong Kong offering.

For a while at least, with their eyes dead set on the AgBank pot of gold, global bankers could set aside concerns about the challenges they face in China, a market they are desperately trying to crack but where they are finding more setbacks than successes.

Why they want in is no mystery.

Economists at Goldman Sachs believe that mainland China's market capitalization will rise to $41-trillion by 2030 from $5-trillion now. That would make China's stock market the biggest in the world. U.S. market cap is expected to grow to $34-trillion from $14-trillion over that time.

But with China, American financial powerhouses may have met their match. Here, government connections and family ties can trump decades of banking experience and western swagger. So for all their efforts - and kowtowing - this is likely to remain one tough market Wall Street firms.

GOLD RUSH

In Beijing, where the towering gray headquarters of the world's largest banks - Industrial and Commercial Bank of China, China Construction Bank and Bank of China - cast a long shadow, Wall Street banks are still on the outside looking in.

The towers in and around Financial Street wouldn't look out of place on Wall Street. But looks can be deceiving.

"You can't just come in here and act like this is New York and try to operate the same way you would in New York," said Philip Partnow, who heads China M&A for UBS.

Global banks trying to jump-start their China operations are tangled in a web of strict regulation, culture clashes and politics. They worry too that even the sweat equity they are putting into training their partners in the ways of western banking will be lost. Some wonder whether China's long-term plan includes their foreign guests from Wall Street.

"At some point, the Chinese want to get to the point where they don't need the foreign investment banks," said Michael Werner, a Hong Kong-based China banking analyst with Sanford C. Bernstein.

China's domestic "A Share" IPO market is especially tightly controlled. Even though global banks are actively underwriting listings for Chinese firms on the Hong Kong exchange, they are being shut out of the mainland IPO market.

The China IPO market has reached $56-billion so far in 2010, more than five times what it was a decade ago. Despite such torrid growth, major U.S. banks have moved down the underwriting rankings, while domestic banks have solidified their spots at the top.

Global banking powers like Goldman Sachs , Morgan Stanley and JPMorgan have an investment banking presence in China, which connect Chinese companies, often state-owned entities, with foreign capital. The Chinese banks have not built up their international distribution networks yet, leaving the door open foreign banks to get a piece of the market.

But what happens when China's banks and its growing ranks of regional securities firms are able to shoulder the load?

Some foreign bankers fear they will be sidelined, with years of investment lost, and invaluable know-how left in the hands of their Chinese partners.

"Basically, it is a big technology transfer that is going on here - and then the Chinese shut the door," said Gordon Chang, author of the book 'The Coming Collapse of China'. "They've done this so many times."

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