The chairman of one of China’s biggest state lenders has called on the country’s financial sector to speed up its expansion overseas in a strong sign that Beijing is considering allowing banks to resume offshore mergers and acquisitions.
Xiao Gang, of the Bank of China, said in an essay published on Thursday that the post-financial crisis environment provided excellent opportunities for expansion, calling this an “inevitable trend”.
“The financial institutions devastated by the global crisis still need time to recover,” Mr Xiao wrote. “[Chinese] banks that have the ability should hasten their pace in ‘going abroad’ and increase their international competitiveness.”
Renewed interest in acquiring overseas institutions would mark a sharp policy change in Beijing, which virtually banned offshore mergers and acquisitions by Chinese financial groups as the crisis broke.
The ban followed a flurry of activity in late 2007 when Chinese state companies and investors made ill-fated investments in western counterparts, including ABN Amro, Fortis, Citibank , Blackstone and Morgan Stanley .
, Blackstone and Morgan Stanley .
Mr Xiao said the banks’ offshore expansion should include acquisitions, while continuing the emphasis on organic growth to follow Chinese corporate customers into overseas markets.
“China’s banking sector first formulated its international expansion strategy years ago but this process was slowed down after the financial crisis broke out,” said Guo Tianyong, director of the Chinese banking research centre at Central University of Finance and Economics. “The outbound expansion of the banks is inevitable.”
"[Chinese] banks that have the ability should hasten their pace in ‘going abroad’ and increase their international competitiveness."
Chinese lenders such as Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China are the largest in the world in terms of market capitalisation and have the biggest profits.
With backing from the Chinese government – their biggest shareholder – they are expected to play a more important role in global finance, especially as large Chinese state corporations – their biggest customers – continue to seek new markets.
But Beijing has told banks to avoid trying to break into western markets through big, politically sensitive deals and concentrate on developing regions.
Mr Xiao echoed this line, saying banks should focus expansion on fast-growing emerging markets such as Southeast Asia, the Middle East, South America, Eastern Europe and Africa, where “cultural acceptance is stronger” and the banks could enjoy a competitive advantage.
Separately, BoC vice-president Yue Yi was quoted by a local newspaper saying his bank planned to acquire lenders in countries in the Association of Southeast Asian Nations, whose members include Indonesia, Vietnam and Malaysia.