It makes a rare change to see a Chinese bank opening in the west,
rather than vice versa and we may see a lot more similar moves by
Chinese banks, analysts say. The rationale is quite simple.
As Chinese manufacturers seek to expand overseas, the country's
banks will follow them or, even better, arrive ahead and stake an early
claim, as China Merchants is doing.
China Merchants is unlikely to enter the mainstream US banking
market. That is just as well as the US market is highly competitive —
there are over 7,500 banks in the US and ten times as many branches.
China Merchants listed
in Hong Kong last year and it is seen as being more
commercially-oriented than the country's big four state-controlled
commercial banks. It has fewer non-performing loans and operates more
like a for-profit business.
Which is just as well, to judge from this scary SeekingAlpha article that argues China's big state-owned banks will inevitably collapse under their mountain of NPLs.
US treasury secretary Henry Paulson also recently attacked
the lending practices of China's state-controlling banks, particularly
the largess they show to state-owned enterprises at the expense of
private-sector customers. He believes greater foreign participation in
China's domestic financial institutions is the best way to correct
their bad habits.
Things don't look much better lower down the league in China's
regional banking market, where the government is pushing smaller local
banks to merge to create new regional entities. Sanxia Bank, based in
Wanzhou near Chongqing, could be the next regional bank to be formed, according to Reuters.
The province-wide footprint of these new regional banks make them
attractive partners for western banks, particularly now that the most
obvious marriage candidates among China's big nationwide banks already
have chosen their partners.
But these banks also pose special challenges, not least their
allegiance to local governments which could thwart western investors'
efforts to end “relationship-driven lending”.
Elsewhere on the banking front:
Deutsche Bank joins the queue of western banks planning to
incorporate in China, a move that allows it to offer yuan-denominated
products. It already has branches in Beijing, Shanghai and Guangzhou,
and has just opened a sub-branch in Beijing to cater for net-worth
individuals and SMEs. China's banking regulator last week approved
similar applications from four foreign banks; HSBC, Standard Chartered,
Citigroup and Hong Kong's Bank of East Asia. More than 70 foreign banks
now have branches in China but until the restrictions were eased this
year, they were limited to operating in foreign currencies. More on
Standard Chartered's mainland plans here.
Chongqing City Commercial Bank plans to raise up to $300m
from an IPO in HK, according to the South China Morning Post. The IPO
will not happen until 2008, giving Lehman Brothers plenty of time to
restructure the bank and arrange the offering. Carlyle Group, the US
buyout firm, , and Dah Sing Financial Group in December paid 1bn yuan
for a combined 25% stake in Chongqing Bank last year.