Sun Lijian, deputy dean of the Economic Faculty of Shanghai-based Fudan University, believes Chinese financial institutions should first learn to manage risks.
"Risks could probably be bigger than gains if Chinese players enter the game right now. Besides, not all plummeting assets are of investment value," he says, advising Chinese financial institutions to go for "safer products" like bonds now and then change the investment portfolio after the market stabilizes.
"In fact, we have to think twice whether we should really speed up our investment in the West when most foreign financial institutions are investing heavily in emerging markets rather than developed countries."
Another option
If the right timing to buy into international financial stalwarts is so hard to judge, striving for a bigger market share in emerging markets is a great alternative, experts say.
"Falling shares prices of biggies such as UBS and Citigroup not only brings down their market value but also impairs their refinancing abilities in the market," says Lian Ping, chief economist with the Bank of Communications. "With weaker capital strength, they can hardly fuel further expansion. In fact, some of them are considering reducing their business and slice off parts of divisions."
With foreign rivals slowing down, Chinese players are already making their presence felt in the global market. In early February, the banking regulator approved ICBC's acquisition of a 20 percent stake in South Africa's Standard Bank. The bank would dish out $5.6 billion for the stake in Standard Bank - the biggest overseas investment by a Chinese firm as well as the biggest foreign investment in Africa.
According to Pan Gongsheng, ICBC may complete another acquisition this year. The bank still plans to buy into Thailand's ACL bank even though Bangkok Bank postponed the sale of a 19.3 percent stake in ACL to ICBC, which was set for the end of 2007. The sale is on hold pending Thailand's new commercial law that is expected to raise the foreign stakeholder limit from 25 to 49 percent.
ICBC will continue its global hunt for new acquisitions in the coming years, with an emphasis on emerging markets. Bank President Jiang Jianqing says he wants overseas business to account for 10 percent of ICBC's total revenues, up from 3 to 4 percent at present.
Guo Shuqing, president of the country's second largest lender China Construction Bank, said last year that CCB was also keen on overseas mergers and acquisitions but refused to elaborate. He did, however, say the bank hoped to expand in Japan. CCB would also look at other countries that enjoy close economic ties with China.
Chinese banks have been speeding up their organic growth in overseas markets as well. ICBC this month said it had won approval from Qatar's banking regulator to set up a branch in Doha, making it the first Chinese bank to open a branch in the Gulf. The bank is also planning branches in Dubai and Sydney.
(China Daily March 17, 2008)
