China Merchants Bank, the country's sixth largest lender, wants to set up shop in the US and has applied to US banking authorities to open a branch in New York.
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:
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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.
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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.
