Chinese Companies Go Abroad (Part 3: The Financial Services Sector)

Jan. 07, 2009 7:33 AM ETPGJ, CAF, GXC, FXI, MS, BX, C2 Comments
Shaun Rein profile picture
Shaun Rein
879 Followers

Part 3: Financial Services

The following is part three of a ten part report evaluating the progress of key Chinese industries as they expand overseas (see the introduction to this series, part 1 and part 2). CMR interviewed several hundred key executives in each of ten industries to better understand the extent of their globalization thus far, their goals and plans going forward, and the major challenges they are meeting along the way. This section describes the opportunities and challenges facing China's financial services industry.

Expansion abroad is a top priority for China's financial institutions. Given the current worldwide financial crisis, and relatively large amounts of liquidity at their disposal, Chinese banks are in a good position to make meaningful progress towards this goal. 100% of large industry leaders interviewed have already started moving overseas, and all respondents have either begun the move or plan to begin within the next five years.

However, there is fear right now by the Chinese Government that too much losses will be incurred by financial institutions if they go abroad and buy non-transparent financial assets which will slow some of the acquisitions. Perhaps their experience with Non-performing Loans (NPLs) make them cautious. For instance, the Bank of China has not gotten final approval yet for its announced 20% stake in Rothschild. Expect this cautious note to prevail for the next several months as the China Investment Corporation (CIC) has been burned with investments in Morgan Stanley (MS) and Blackstone (BX). While the CIC is an investment vehicle and not an actual bank like an ICBC, the experiences of CIC clearly is influencing all relevant regulatory bodies in China and making them think thrice before giving approvals.

Motivations

Chinese financial institutions initially moved overseas to serve corporate clients expanding their businesses abroad. Maintaining these clients' business is

This article was written by

Shaun Rein profile picture
879 Followers
Shaun Rein is the Founder and Managing Director of the China Market Research Group (CMR), the world's leading strategic market intelligence firm focused on China. He works with Fortune 500 and leading Chinese companies, private equity firms, SMEs, and hedge funds. Clients include Apple, Yum! Brands, Richemont, DuPont, Ecco Shoes, LG Electronics, Samsung, Unitas Capital, CLSA, China Capital Today, Hutchison Whampoa, Lane Crawford, Hard Rock International. He is the author of the international best-selling book "The End of Cheap China: Economic and Cultural Trends that will Disrupt the World” published by John Wiley & Sons in the US. Rein is a columnist for Bloomberg BusinessWeek on business in China and teaches executive education classes for the London Business School. He previously was a columnist for CNBC and Forbes. He is often featured in the Wall Street Journal, Fortune, and The Financial Times and frequently appears on CNBC, Bloomberg, BBC, and CNN. He earned his Master's degree from Harvard University focused on China's economy and received a BA Honours from McGill University. He sits on the Asia Council for St. Paul's School.

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