Bank of China Limited : China Daily: BOC leads international charge

Overseas business, renminbi settlement fueling growth

The only Chinese bank in continuous operation for 100 years, Bank of China Ltd (BOC) will continue to expand its overseas network to further develop its transnational business, said executives of the giant State-owned commercial lender.

They added that they envision BOC will become a truly world-class bank by 2020.

"Our roots in the domestic market, yet operating across borders, distinguishes BOC from its domestic counterparts," said Xiao Gang, board chairman of the bank.

"We will use both international and domestic markets and resources to accelerate development of a customer-focused, market-oriented global service system," he said.

The expansion "will enhance the bank's global services and brand value", Xiao added.

Board members have made overseas business a strategic priority, so the lender will continue to increase its number of branches worldwide while prudently considering acquisitions, the bank said earlier.

In the first half of 2011 alone BOC established more than 20 new foreign branches.

By the end of last year, BOC had 586 overseas outlets in 32 countries, as well as Hong Kong, Macao and Taiwan, with 21,100 employees.

International

Before the founding of the People's Republic of China in 1949, Bank of China had 34 branches in 14 countries or regions after establishing its first overseas branch - also the first by any Chinese financial institution - in London in 1929.

To extend its network overseas, the bank has also used agent banks.

In 1929, the bank has 17 agent banks in the United Kingdom and the United States.

As China opened up, agency relationships were developed around the world. Initially concentrated in Western Europe and Southeast Asia, the bank went on to forge ties with 1,500 agent banks in more than 180 countries and regions by the end of 2011.

Last November, BOC was selected as a global systematically important financial institution by the Financial Stability Board, becoming the first commercial lender from an emerging market to join the "too big to fail" club.

In December, the rating agency Standard & Poor's raised BOC's rating from A-minus to A, citing the "very high likelihood of extraordinary government support" in the event of financial distress.

The bank also has competitive advantages in international clearing and settlement services that facilitate Chinese business expansion overseas.

Overseas advantages

It has supported more than 1,300 projects with a combined contract value of $190 billion in 100 countries and regions.

In January, the bank announced its international renminbi settlement surpassed 1.7 trillion yuan in 2011.

It has 24 foreign institutions providing customers with renminbi settlement services. BOC (Hong Kong) Ltd handled more than 550 billion renminbi, while other overseas institutions processed more than 430 billion in Chinese currency payments.

As the largest international settlement bank, BOC is the global leader with more than 500 clearing accounts at overseas banks.

BOC (Hong Kong) Ltd and its Macao branch were appointed by the central bank as the only clearing banks for Chinese currency transactions in the two special administrative regions.

"In addition, we have more than 10,000 branches in the domestic market, which is a major advantage as the cost of establishing more branches is lower than for major foreign banks," said BOC President Li Lihui.

In addition to its efforts to serve Chinese clients expanding overseas, BOC is also gearing up to penetrate the local mainstream market.

"We expect to expand business in Asia first to enhance penetration. In developed markets such as Europe and the US we'd like stable growth in business relationships with large international companies and enter the mainstream market gradually," said a statement from the bank.

Eyeing foreign markets for diverse growth

Bank of China Ltd, one of China's four biggest commercial lenders in market value, sees greater business potential by expanding into overseas markets.

"BOC, the most internationalized Chinese lender, seeks to be the right partner for many Chinese companies hoping to achieve more success by expanding abroad," said the bank.

Foreign direct investment (FDI) from China has risen steadily in the past nine years. Non-financial direct investments from China to 132 countries and regions exceeded $60 billion, 1.8 percent higher from a year earlier, according to data released by the Ministry of Commerce on Jan 18.

FDI growth slowed down last year, Shen Danyang, spokesman of the ministry, said, but government policies that encourage enterprises to expand overseas would not change, and officials are prepared to carry on in support of these measures.

"Commercial lenders have become more aware of better business opportunities as global projects are becoming increasingly diversified. Bank of China will still focus on the national economy to attract more domestic clients. However, the bank is establishing a large international banking conglomerate that could carry forward more cross-border benefits," said Xiao Gang, board chairman of BOC.

Sinopec Group, one of the leading Chinese petroleum companies, has cooperated with BOC for 20 years out of the 29 years of its existence.

"Its current business relationship no longer just involves borrowing and lending, but has transformed into an all-round strategic partnership," said Liu Yun, chief accountant at Sinopec.

Liu said the bank enjoys special advantages with financing in foreign currencies on behalf of its corporate clients.

"It has built up lending centers in Europe, the Americas, and Asia-Pacific regions to meet the demands of companies to provide a full range of services. As one of the biggest State-owned enterprises, Sinopec expects to cooperate with BOC in the long-term future."

The China Ocean Shipping (Group) Co (COSCO), one of the world's largest shipping companies, has also received remarkable benefits by cooperating with the bank.

"Our group wouldn't have become what it is today without a partnership with BOC," said Wei Jiafu, president and CEO of COSCO.

COSCO, founded in April 1966, has transformed from a traditional Chinese State-owned enterprise into a globally respected corporation.

Wei said the value of integrity as a core principle for BOC keeps customers loyal.

"Some groups may choose other banks to finance projects, but COSCO would remain a partner with BOC, since the bank caters to Chinese enterprises that are expanding overseas," he said.

London and New York branches shining bright

Bank of China Ltd has established overseas branches in New York and London, which sets a good model for other Chinese lenders that are seeking to expand into the developed markets and build up a strong reputation among its local clientele.

The bank set up a London office in November 1929, the first foreign branch to be operated by a Chinese bank.

Later BOC expanded across the United Kingdom by establishing offices in Birmingham, Manchester, Glasgow and Chinatown of London.

In the past eight decades, BOC remains a strong presence in the city of global finance.

In September 2010, 300-plus employees of BOC London moved into a new building that stands shoulder to shoulder with the Bank of England that has a rich history of over 300 years and located in the heart of London.

"The London branch has drawn a diverse customer base by cultivating customers from local Chinese-ethnic communities and businesses. The bank supports them through their UK ventures," said Liu Xiaoming, Chinese ambassador to the UK.

Employees of BOC London are hired mostly on a local level; as 90 percent of its workforce is British, many of them serve as mid-level and senior managers.

With a solid business strategy, a small non-performing loans ratio and sufficient liquidity, it survived the financial crisis of 2008.

BOC has developed its retail and corporate banking businesses all over Europe, attracting clients such as the ABB, British Airways, Deutsche Lufthansa AG, and Rolls-Royce Motor.

Even though challenged by the gloomy economic situation in the US and Europe, as well as the worsening euro debt situation in 2011, the London branch realized a 35 percent year-on-year growth rate with its international settlement business, along with a capital volume standing at $17.2 billion by the end of October.

BOC is entering the credit market for crude oil trades, a sector that has been monopolized by banks from the US and Europe, while also providing other settlement services for commodity traders.

New York branch

Since the founding of the New York BOC branch in 1981, it has been exploring the local market through establishing sub-branches in the Chinatowns of New York in 1985 and in Los Angeles in 1988.

The branch initially targeted local Chinese-ethnic communities, Chinese institutions, small and medium-sized enterprises and other investors, to facilitate trade between China and the US.

In recent years, the branch focused on serving domestic enterprises that intend to go global, as well as targeting the mid and high-end markets.

Against the backdrop of the financial crisis, BOC adjusted its business development strategy and expanded lending that included enterprises that sought more liquidity.

During the financial turmoil, the branch ensured smooth operations of the clearing system and security of all financial transactions and payments. BOC stood out by holding on to ample liquidity while the US market had been drained of capital.

More notably, due to an increasing demand for settling trades in the renminbi in 2009, the New York branch was the first lender to launch a Chinese currency trading business in the local market.

The branch is expected to become an offshore renminbi business hub for the US in the upcoming years, while serving as the main channel for Chinese financial institutions to settle and clear dollar settlements.

By the end of 2011, total assets of BOC New York has increased 11-fold from when it began operations, with net profits rolling in at a faster pace each year.

It has already established relationships with major US corporations listed on the "Fortune 500" list.

From China Daily 2012-06-26

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