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OCBC China taps prospects in deregulation
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China’s persistent efforts to encourage cross-border use of the yuan and overseas expansion by local companies have offered foreign banks in China a silver lining in the cloud currently hanging over the economy.
Eight years after the first group of foreign banks registered their local subsidiaries in China, the combined market share of foreign players still hovers below 2 percent by assets.
The low figure is, to some degree, the result of restrictions on the geographical expansion of foreign banks and on the advantage enjoyed by domestic banks with expansive retail networks.
Against this backdrop, foreign banks like OCBC China are trying to seize a niche serving corporate clients with international business needs.
Last year, OCBC Bank acquired Hong-Kong-based Wing Hang Bank. It also increased its investment in the Bank of Ningbo from 15.3 percent to 20 percent, making the BoN an associated company of the OCBC Group.
Shanghai Daily sat down with Kng Hwee Tin, executive director and CEO of OCBC China since 2013, to discuss the new opportunities foreign banks see in China’s reforms and the deregulation of the financial industry.
Q: What changes have you observed in the China market in recent years and what new opportunities do you see as China continues to internationalize its trade and currency?
A: Since 2013, we have been expanding and strengthening our core businesses, such as corporate banking and treasury — activities that provide us with sustainable growth as the market evolves.
The trade volume between China and Southeast Asia has been growing in recent years, given solid economic ties between both markets. Many Chinese corporates are extending their presence in Southeast Asia, while Asian companies are looking to make inroads into China.
We continue to follow closely developments in yuan liberalization and the “Belt and Road” initiative. To capture new business opportunities arising from these initiatives, we have formed an internal task force to explore onshore and offshore opportunities with the other entities within the OCBC Group.
The increasing internationalization of yuan will facilitate the development of a range of yuan products and services across treasury, trade finance, cash and payments. OCBC China received approval as a direct market maker for yuan-Singapore dollar direct trading in China's interbank market last year.
Q: Sometimes people complain about tight regulations on foreign banks and the slow progress of reforms in China. What do you think?
A: It does take some time for foreign banks to understand the regulatory environment in China, which can appear more complex than what they may be accustomed to in their home markets. For one thing, in China, banks have to comply with regulations at the national level as well as the provincial and municipal levels.
Nonetheless, I see the efforts and hard work that Chinese regulators at all levels are doing to establish regulations of international standards, while at the same time managing the tough balancing act of driving market reforms and managing risks. I also fully respect the Chinese authorities for their willingness to listen to the views from the market. This can be clearly seen from the loan-to-deposit ratio regulation. Over a period of time, we have shared some feedback on this from our perspective as a foreign bank in our regular talks with regulators. I believe that the regulators have taken feedback from market participants, including ours, into consideration.
As a responsible market participant, it is equally important that we put ourselves in the shoes of the regulators to understand the rationale behind policies.
Q: OCBC acquired Wing Hang Bank last year. What will be the impact on Chinese mainland operations?
A: OCBC Bank now has an expanded presence of 33 branches, sub-branches and offices in China, including a network in the Pearl River Delta, one of China’s main hubs of economic growth. Not only are we excited about the opportunities arising from the enlarged network, but we are also looking forward to being able to reach out to new customer segments in this market.
Wing Hang Bank’s expertise in secured and unsecured small- and medium-size enterprise banking in China complements OCBC China’s current focus on corporate banking.
OCBC China will be able to leverage Wing Hang China’s network, particularly in the Pearl River Delta region, to increase its access to those enterprises, to large corporates and to top-tier state-owned enterprises with new products such as cash management and treasury solutions. This will better enable us to capture more of the burgeoning trade and investment flows between China and Asia.
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