Australia's ANZ bank is to buy a 19.9% stake in Shanghai Rural Commercial Bank for $252m. The deal
(pdf) is a sign of the continuing attraction that JVs have for foreign
banks despite new rules that will allow them to operate independently
in China's retail banking market.
SRCB is the largest rural commercial bank in China with 330 branches and 5,000 staff across Shanghai. It is China's 17th largest bank by assets. The two banks are no strangers as they have had a commercial cooperation agreement for three years.
The 19.9% stake is the largest participation that foreign banks are allowed in Chinese JVs and this long-standing limitation has not been relaxed despite the introduction of new rules designed to open up China's retail banking market -- see this EngagingChina story.
While large European and US banks are now more likely to go it alone in China -- or buy strategic stakes in China's biggest banking groups -- smaller players like ANZ see more potential in JVs with China's second-tier banks.
The SRCB deal is ANZ's second equity investment in a Chinese bank, following its deal to purchase 19.9% of Tianjin City Commercial Bank for $120m last December, one of the first acquisitions of its kind by a foreign bank.
ANZ has been operating in China for 20 years, having been the first Australian bank to open a representative office in 1986, in Beijing. ANZ has operated a fully licensed foreign bank branch in Shanghai since 1993, upgraded its Beijing representative office to a branch in 1997 and re-opened its Guangzhou representative office earlier this year.
In the same week, the People's Bank of China has opened an office in Sydney, Australia. This is only the seventh office that China's central bank has opened overseas, and the choice of locations reveals much about the relative importance of China's many trading partners.
As well as Sydney, the bank already has locations in New York, Tokyo, London, Frankfurt and, most surprisingly, Abidjan in the Ivory Coast. It also has a liaison office at the Caribbean Development Bank.
The Aussie office is designed to help expand the bank's cooperation with monetary authorities in the south Pacific region, where China has developed close relations in recent years.
Australia is now a major supplier of iron ore, wool, natural gas and
other important products to China. And New Zealand is the first
developed nation to start free trade area talks with China.
