A branch of Bank of China in Brussels. (Photo/Xinhua)
Chinese banks have found a way to bypass the country's regulatory restrictions on the various financial services they can operate and enter the critical investment banking sector, Shanghai's First Financial Daily reports.
Despite existing regulations prohibiting commercial banks from operating brokerages, insurance and investment banking businesses, China's banks have diversified into areas beyond traditional banking, said Wang Yongli, executive vice president of Bank of China.
Wang's remarks at the Sixth Annual China Bankers Forum in Beijing on Sept. 10 were actually about the country's four leading state-run banks — Bank of China, Industrial and Commercial Bank of China (ICBC), China Development Bank and Agricultural Bank of China.
As of the end of 2011, the four banks owned combined overseas assets of over 4 trillion yuan (US$631 billion) and 1,259 subsidiaries outside the country, the newspaper reported.
Bank of China is the most internationalized bank among the four because of its historical background. However, the newspaper pointed out that the three other banks had been catching up in the past two to three years.
ICBC increased its overseas presence to 252 branches in 34 countries, including Brazil and African countries, in recent years, while China Development Bank is aiming to complete its overseas expansion by 2015.
Although Chinese banks' international plans have received the general support of the industry and the public, Wang pointed out that the major challenge is for bank headquarters to develop global visions and strategies, and display the ability to operate globally with the same information systems.
In addition, Wang said it was important for Chinese banks to know why they are expanding overseas, instead of merely jumping on the bandwagon.
Meanwhile, Ba Shusong, deputy director-general of the Finance Research Institute of the Development Research Centre under China's State Council, said Chinese banks still trail behind their foreign counterparts in terms of internationalization.
Ba was basing his remarks on the fact that with the exception of a few overseas subsidiaries, especially those in Hong Kong, Chinese banks' operations abroad still rely on business from Chinese companies and have not yet integrated themselves into the local markets. He also highlighted the banks' focus on innovation in their business approach in the process of their internationalization.
Although Chinese banks are allowed to venture into other financial services such as leasing and trusts, they cannot set up investment banking operations in China. However, the four state-run banks were able to engage in investment banking via their Hong Kong subsidiaries, which are permitted to do so in the former British colony, Ba said.
Besides setting up investment funds, Chinese banks could also underwrite new stock listings in China through overseas subsidiaries, added Ba.
He predicted that such practices, which had been created because of the marketized regulatory environment in overseas markets, would be adopted by more Chinese banks to overcome the restrictions within the mainland.