3月11日，《Shanghai Daily》整版刊发我院执行院长张春教授专访报道，在金融改革的背景下，张春教授对于四大国有 银行加速国际化步伐发表了真知灼见。

Constrained at home, banks expand abroad

FOLLOWING in the footsteps of China's most global companies, the state-owned Big Four banks are accelerating efforts to seize opportunities overseas as financial reforms at home start to heighten competition and undercut profits.

Obviously, the Big Four have ample cash for overseas expansion, Chang Chun, executive director and finance professor at Shanghai Jiao Tong University's Shanghai Advanced Institute of Finance, told Shanghai Daily in an exclusive interview. It's one of their most significant strengths.

Chinese banks have become the nouveau riche of global banking. Their combined profits accounted for nearly a third of the world market in 2011, a significant escalation from merely 4 percent in 2007. Three of the Big Four banks - Industrial and Commercial Bank of China, China Construction Bank and Bank of China - ranked as top money-spinners last year in The Banker magazine's list of the most profitable banks in the world. The fourth bank in the quartet is Agricultural Bank of China.

Competitive advantages include their gigantic service networks onshore, which are the source of steady future income to support their expansion beyond borders, Chang said.

But most importantly and most uniquely, he added, is the historical tie between the Chinese lenders and state-owned conglomerates. If the banks don't extend their operations overseas, they might lose core customers who are expanding offshore. They cannot afford to do that.

The Big Four have established overseas branches all over the world, providing an array of business services that include accounts receivable and payable, trade and supply chain financing and liquidity management.

Largely unrecognized

Although the Big Four have made hefty profits while the European banks were counting the cost of the Eurozone sovereign debt crisis, their international footprint remained largely unrecognized by most people in the Western world. At home, the banks have come under criticism for their easy profits, which came as a result of China's regulated interest rates, Chang said.

In the book Big Inflection Point, independent political and economic commentator Yuan Jian chided the banks for getting rich at the expense of Chinese savers, whose deposits earned scant interest.

In June last year, the People's Bank of China allowed lenders for the first time to offer up to 10 percent above the benchmark deposit rates. It was part of the central bank's deregulation efforts. As the wheels of China's financial reform roll faster, the lenders are coming under tighter margin pressures.

As the era of easy profit fades, banks are pushed to seek new growth in overseas markets, Chang said. The timing is right for them to look offshore.

It's the same on the corporate side of the business world, he added. Some fast-expanding sectors have reached a plateau and have to look for overseas opportunities, he said. These corporate clients need services like merger-and-acquisition financing and financial consultancy. At the same time, on the consumer side, the growing number of Chinese students studying overseas and the migration of mainlanders to foreign countries have also created a new market for Chinese banks.

Most internationalized

Bank of China, the most internationalized lender among the Big Four, has 90 overseas branches, representative offices and subsidiaries, almost tripling the number in 2009. Chang said BOC is the most competitive lender among the Big Four because it's China's biggest foreign-exchange bank and one of the issuers of banknotes in Hong Kong.

As lending to property developers in China came under stricter government controls, BOC has become an active lender to commercial property developers in the United States. Outstanding loans to commercial properties at its branches in the US almost quadrupled from 2009 to US$3.7 billion last year, according to the Wall Street Journal.

BOC joined a group of banks last November in a syndicated loan of US$950 million to finance a building in Manhattan. It has surpassed the German lenders who were the most active foreign lenders in the US during the bubble years.

BOC is now the third-biggest foreign property lender in the US.

Chang said the banks' overseas ambitions are aided by Chinese government reforms aimed at making the yuan a more international currency.

A freely convertible yuan requires complete capital account convertibility, Chang said. It will take at least three to five years to accomplish. A fully internationalized yuan would eventually turn it into a reserve currency, like the US dollar.

Free capital flows, he noted, would transform the Chinese economy by boosting demand for yuan from both businesses and individuals, which would, in turn, help extend the banks' playground beyond Asia.

Capable people

Yuan said in his book that globalization enhances cross-border trading, resource allocation and cultural exchanges. The forces are driven by capable people, he said.

International banking operations require the right people - the global-minded executives and staffs, Chang said. The hindrances go beyond language and culture differences. What's in the way could be something like the manner in which state-run banking giants manage personnel.

He said joint-stock lenders, such as China Merchants Bank and Shanghai Pudong Development Bank, are more nimble in personnel management. Although they don't have the reserves of the Big Four, they do have enough capital to look at overseas expansion.

Another dark horse is the Bank of Communications, the No.5 lender, which made good leveraging its ties with the biggest European bank, HSBC, he said.

Globalization planted the seed of the transformation of China, Yuan wrote. He contends in his book that China's embrace of the increasing interdependence of national economies has helped catapult the country into the world's second-biggest economy.

The process started in the 1980s, when China first began opening its doors to the outside world and welcoming foreign capital. It was boosted by China's entry into the World Trade Organization in 2001, which brought more top- class competitors into the domestic market.

Foreign companies brought advanced technology and management philosophy to China. Now that many domestic companies have abundant capital and more sophisticated management expertise, the obvious next step is venturing overseas.

In 2012, the number of Chinese enterprises in the Fortune's Global 500 list grew for the ninth straight year to a record 79. It was the first time the number of Chinese firms surpassed Japan's.

Constrained at home, banks expand abroad