Tough road for Chinese banks to go overseas
Updated: 2007-07-12 09:36
But the banks have a lot to overcome before they can make this a reality.
The listed commercial banks have introduced international accounting standards, and a legal framework for corporate governance and services following their IPOs.
But most remain State-owned banks in many respects. It will probably take considerable time and effort to change their enterprise culture and value into a modern, international one, without which they would be unable to integrate into the global market.
The banks also face extra costs as newcomers in a foreign country.
The heavy reliance on credit and risk calculations would make these banks much more vulnerable than the local veterans.
Unfamiliar with the enterprises and clients, the banks may struggle to gain a foothold overseas amid fierce competition.
They would have to spend more heavily to acquire accurate information about businesses, assess the credibility of clients, evaluate competitors, and study the related laws and regulations.
Another thorny issue in the commercial banks' efforts to tap the international market is State intervention in the banking sector. Because of the special position of banks in the economy, every government, some more some less, intervenes to ensure a sound financial industry.
It is therefore a must to have a thorough understanding of the rules and regulations of their target markets before they take the plunge.
It is reported that ICBC has applied to open businesses in the United States and Russia, so that it can become a multinational bank. This is probably the goal of most Chinese banks.
But before they do that, they must ask themselves whether they have the right strategy? Do they have the right professionals?
The banks could establish pilot projects to gain the necessary knowledge, before taking that final step.
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