Chinese banks seen rising in financial markets - report

By Rizza Sta. Ana

Dec 28, 2013 01:34 PM EST

A report by The New York Times' The DealBook said Chinese banks are now taking the lead in the financial world this year. The report added that the banks in China are acquiring assets offshore, which are driven by the state's diaspora and trade flows.

Financial institutions in China were noted to be expanding internationally, with 2013 the year of many firsts. The Agricultural Bank of China are now clearing yuan trades in the UK, and Industrial and Commercial Bank of China recently issued a yuan-denominated British bond. According to The DealBook, the Chinese currency is the second most-used money in trade just after the US dollar.

The next logical step that Chinese banks could take would be takeovers, the report stated. Although a a London-based emerging market lender, Standard Chartered and ICBC pairing could be a complex dream even though the former's valuation is sliding, majority stakes in markets such as in the UK wherein Chinese firms invest and trade would make more sense, the report reasoned. In November, the China Construction Bank had set the tone by purchasing a stake in BicBanco of Brazil. The DealBook deduced that similar deals could happen in Eastern Europe and Africa, and that even oil-rich Iran may be a target in a sanctions-free world in the future.

On the other hand, the report cautioned the mistakes Japan had made in the 1980s, when it tread a similar path like that of China. When bad debts increased at home, Japanese lenders then retreated from the international markets, leaving a credit squeeze in the process.

The DealBook suggested and wrote, "China's saving grace may be its banks' inexperience and government micromanagement. CCB's BicBanco deal was two years in the making, and ICBC has been haggling over Standard Bank's London-based commodities desk for over a year. That limits the scope for impulsive and foolish deals. Capital controls also mean China's banks can't easily switch their onshore yuan into dollars or euros, limiting their ability to lend abroad."

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