By Wang Xinchuan

With the acceleration of Chinese enterprises' "going global", Chinese-funded banks are faced with a vast space and favorable condition for international development.

The cases of oversea merger and acquisition by Chinese enterprises are heard frequently since the beginning of this year: Shandong Heavy Industry invested ��374 million to acquire 75 percent share of Italian Ferretti Group, a world leading Yacht company and Sany Heavy Industry spent RMB 2.654 billion yuan to acquire 90 percent share of Germany Putzmeister...

"In the series of oversea merger and acquisition, Chinese-funded banks play a more and more important role," president of Hongkong Branch of CMSB (China Minsheng Banking) said in an interview. Commercial banks find plenty of hitting-points for cooperation during the process of "going global" of Chinese enterprises with their financial consultant service, project financing or settlement service.

Survey on Current Conditions and Intention of Overseas Investment by Chinese Enterprises released by China Council for the Promotion of International Trade earlier indicates that 88 percent enterprises interviewed showed their intention to increase oversea investment moderately within 2 to 5 years but all expressed their concern about oversea financing. It indicates that due to the oversea branches of Chinese-funded banks fail to develop their products and services synchronously, the "going global" of domestic enterprises is still restricted by financing difficulty.

"Oversea investment of the banking industry is an inevitable choice as a result of economic structural adjustment and sustainable development in China. The Chinese-funded financial organizations are required to 'going global' to offer financial service", Jiang Jianqing, chairman of ICBC (Industrial and Commercial Bank of China) said earlier. With the acceleration of Chinese enterprises' "going global", Chinese-funded banks are faced with a vast space and favorable condition for international development. It's a high time to go global.

Financial service is expanded steadily.

Oversea branches of Chinese-funded banks do a good job in aspects like credit and bond investment and there is a trend of significant growth for the profit level.

"Financial enterprises are obliged to provide support for the 'going global' strategy", said by Lian Ping, chief economist of BoCom (Bank of Communications). With the rapid expansion of the oversea investment scale by China and significant strengthening of power of the Chinese-funded banks, oversea business has become an important field for performance growth of the banking organizations.

Annual Report 2011 of Bank of China indicates that deposit and loan of oversea customers in last year increased by 26.12 percent and 32.36 percent respectively compared to that in the previous year. The proportion of oversea assets in the total assets rose to 22.39 percent, and profit before tax contribution of the overseas branches grew to 21.23 percent. "In addition to commercial banking business, BOC (Bank of China) also conducts other financial business like investment bank, leasing and insurance in foreign countries", said by Li Lihui, president of BOC. BOC will set up more branches, continue to keep and raise the proportion of oversea business.

Starting from the establishment of Singapore Representative Office, the first oversea branch, in 1992, ICBC has conducted its transnational operation for 20 years. Up to the end of 2011, ICBC has set up a global network with complete certificates, efficient operation and excellent service covering 33 countries and regions and including 239 oversea branches. The quality of ICBC's international operation keeps improved with its profit. According to the statistics, the average compounded annual growth rate of the assets and profit of ICBC oversea branches is about 39 percent from 2000 with the average return on invested capital up to 12.4 percent, outnumbering the average level of the major international banks.

According to statistics, currently, the oversea assets of Chinese-funded banks have exceeded $270 billion and the number of oversea branches has over 1200 with their businesses all over the world. Experts believe that the capability of the Chinese banking organizations to steadily implement the oversea branch layout strategy, continue expanding business scope and make use of the two markets and two resources both at home and abroad is further enhanced.

"Internationalization is an important choice for commercial banks to keep developing and strengthen competitiveness," Jiang Jianqing said, "going global" of the Chinese-funded banks including ICBC is an internal requirement to participate actively the international financial cooperation and competition, and also a significant step to speed up operational transformation. 
"Going global" to be more reasonable.

When "going global", Chinese-funded banks must do what they are capable, adjust measures to local conditions and stick to the tenet to serve the substantial economy.

It is said that the Chinese-funded banks began to set up their oversea branches 10 years ago mainly as communication and cooperation bases, personnel training bases, etc., and never attach too much weight to sustain business and enhance profitability. However, in recent years, with the Chinese-funded banks focusing on offering global and comprehensive financial service for customers and planning as a whole in both the internal and external markets, the resource allocation efficiency is significantly enhanced all over the world.

The branches of Bank of Communication in the UK, San Francisco, Sydney and Ho Chi Minh City were opened one after another in November, 2011. Hu Huaibang, president of Bank of Communication said that they would further find out exactly the development orientation and business feature of the oversea branches and speed up the business expansion in the oversea market. Hu said, "If it is not suitable for the development pattern of Bank of Communication, we will never do it however cost-effective it is".

According to Outline of the 12th Five-Year Plan, the "going global" strategy should speed up, gradually develop the large Chinese transnational companies and financial organizations and enhance their capability of international operation. Presently, though Chinese-funded banks accelerate their pace of international strategy, there is still a large gap compared with the international leading commercial banks.

According to the initial statistics, except BOC, the capital proportion of the oversea branches of other Chinese-funded banks is less than 3 percent and the oversea assets no more than 9 percent. As for business management capability, the Chinese-funded banks set up the modern corporate governance system and keep enhancing the risk management capability so as to extend a strong support to the development of Chinese national economy, but there is still a long way to go for transformation development, because the income structure is still unbalanced and the fine administration, characteristic development, global service and group operation capability are still undesirable.

Insiders view that the Chinese-funded banks should speed up the pace of "going global". However, they should also conduct a cautious business, do what they are capable, and adjust measures to local conditions. In other words, on the one hand, they should, according to the requirement of their own development strategy, carry out market layout selectively, make an optimal choice from the multiple ways including setup of branch, stock participation, merger and acquisition, and steadily advance the international strategy. On the other hand, when "going global", Chinese-funded banks must stick to tenet of serving the substantial economy and make all efforts to provide better financial service for the "going global" strategy of the Chinese-funded banks.