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Chinese banks set to boost global presence: Fitch

Updated: 2013-11-12 19:00
By Hu Yuanyuan (

Chinese banks could be accelerating efforts to expand their global presence, Fitch Ratings said in a report.

This is unlikely to weigh heavily on their credit profiles in the near term, in so far as the rise in global assets - and risks - remains relatively small, according to the report.

For now, the soundness of these banks' overseas expansion strategy is underpinned largely by the increasing global presence of their Chinese corporate clients, and by the internationalization of the yuan, the report said.

The recent purchase by China Construction Bank (CCB) of a controlling stake in a small Brazilian lender is further evidence of this trend.

Chinese banks, spearheaded by the big-four State-owned banks, have boosted their offshore presence in Hong Kong significantly. They have also focused on establishing subsidiaries and branches in key global and Asian emerging markets as well as several other global and regional financial centers.

At present, the credit profiles of the banks are able to withstand these acquisitions, with the level of risks faced at home far outweighing overseas risks.

This is because the size and cost of these takeovers is still small - relative to their assets and equity. For instance, CCB's $730 million purchase of Sao Paulo-based BicBanco equated to just 0.03 percent of its asset value (at the end of 2012).

Moreover, the profit - as well as the risk - contribution of such offshore activity is likely to grow. But it is unlikely to result in any outsized near-term threats, in light of the early stage of these developments, the report noted.

Chinese banks' overseas expansion strategy tracks the overseas expansion path of their domestic clients. In particular, the deepening of Chinese companies' trade and investment linkages in overseas markets creates financing opportunities which the Chinese banks are well suited to provide.

At the same time, it reinforces the efforts of the Chinese authorities to internationalize the offshore usage of the yuan.