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Beijing (AFP) Jan 30, 2011 ICBC, the world's largest bank by market value, is proving the most aggressive Chinese bank in expanding abroad, serving Chinese firms that are increasingly active globally after the financial crisis. Of the country's "big four" banks, ICBC is leading the way as Chinese lenders restart plans that were put on hold by the global crisis and seize new opportunities left in its wake. Bank of China fulfilled that role in the 1980s, but times have changed as Chinese firms have been widely encouraged to invest abroad and Beijing seeks to boost the global profile of the yuan, the experts say. "BoC and ICBC are roughly at parity in terms of overseas activity. But it does indeed appear that ICBC is emerging as the most international of the Chinese banks," IHS Global Insight analyst Adam Breen told AFP. For Andy Xie, an independent economist based in Shanghai, the process is the logical result of the global expansion by Chinese companies, which are branching out to secure vital natural resources and explore new markets. "Even Chinese companies of medium size are going global. If Chinese banks don't offer them services offshore, then they might switch to other banks like HSBC that have both a China presence and an international presence," Xie said. This month alone, ICBC opened branches in Paris, Amsterdam, Madrid, Milan and Brussels -- following on from existing offices in London, Moscow, Frankfurt and Luxembourg. In December, it extended its reach to Pakistan. The month before, reports said ICBC was eyeing a takeover of South Korea's Kwangju Bank. It already has two branches in Seoul and one in the port city of Busan. In addition the bank took advantage of this month's high-profile visit to the United States by President Hu Jintao to announce it had signed a $140 million deal to buy a majority stake in the US subsidiary of Bank of East Asia. If the agreement gets approval from US banking regulators, ICBC will become the first Beijing-controlled financial institution to acquire retail bank branches in the United States. ICBC, which employs 386,000 people worldwide and has more than 200 million customers, now has more than 160 branches outside mainland China and more than 16,000 in the country, according to its website. Experts say Chinese banks' global expansion is only just beginning. "It is rapid expansion only from a very low base," explained Michael Pettis, a professor of finance at Tsinghua University in Beijing. "China is the second-largest economy in the world but in terms of outward direct investment, it is probably eighth or ninth." At first, the banks will serve Chinese companies looking to invest in or buy local businesses, before they target foreign enterprises doing business with the Asian economic powerhouse, experts say. Eventually, they will be viable competitors to local banks, mainly by offering more cost-effective service, Pettis told AFP. "The Chinese banks might become competitive in a few years, and they will probably be competitive where the Japanese were competitive in the 1980s and that is because they provide low funding cost," he said. ICBC chairman Jiang Jianqing told the Wall Street Journal at last week's World Economic Forum that the bank's focus for now would be "mainly on emerging markets, which have good prospects for growth". "For the American market, we are walking in a very careful way," Jiang said. Breen, a specialist on China's banking sector, said the "big four" should focus on developing economies, "where competition is lower, economic growth potential is greater, and the existing domestic banks are less sophisticated". In developed countries, "their best option is to purchase existing banks in those sectors if they want to expand there," Breen said. But he cautioned that "major regulatory obstacles" could block Chinese banks' path in nations such as the United States, where most analysts expect ICBC to face a lengthy process to win approval for the Bank of East Asia deal.
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