Wealth management Essays

Wealth management Essays Wealth management Essay Wealth management Essay The business expansion strategy is to make advantages of their strength in intermediary businesses, such as international business settlement, agency and wealth management, then drive the development of traditional commercial banking services, so that they can attract more premier foreign and local customers. Compared with Chinas banks, foreign banks dont have a branch network around the country, but they have stronger capabilities in products innovation, more professional expertise of international financial market trading and wealth management, etc, also they have a huge branch network around the world. Therefore, foreign banks firstly focus on international business settlement, foreign exchange trading. By providing those extra services that Chinas banks can not make, foreign banks can attract those premier customers that have oversea businesses and strong need for wealth management, then these customers may transfer their other businesses that are currently based at local banks, including RMB settlement, deposits and loans, etc, to foreign banks. The customer expansion strategy of foreign banks is to approach multinationals, joint ventures, foreign funded enterprises and Chinas leading domestic firms. Multinationals, joint ventures and foreign funded enterprises are first targets of foreign banks, not only because those firms have good business performance and credit records, but also their mother companies usually have strong link with those foreign banks. Foreign banks are also keen on Chinas leading firms, including those national teams that have strong oversea businesses, mighty private companies and premier high-tech firms. Obviously, foreign banks would not take risk to expand their business to all corporate customers. In a press conference held by Citibank in 2002, Mr. Huang Xiaoguang, the CEO of its Shanghai Branch stated, we merely focus on three categories of firms, including foreign global giants, Chinas big global firms and those domestic companies with strong international business, in which we can make full use of our global network advantage. We wont break through this customer territory and to do business with other general firms even after Chinas financial market is open completely after 2006. Current status of foreign banks businesses in China A recent survey conducted by FCSSIC (Financial Center of Social Science Institute of China) showed most of foreign banks had successfully extended their businesses in China, though their performance was very different from one another. Overall, the following characters can reflect the current status of foreign banks businesses in China by now: Firstly, the activity domain of foreign banks mainly concentrated in coastal cities. By the end of 2002, there are about 190 foreign banks have conducted their businesses in China. In particular, about 27 among 54 world top banks that are listed in the US Fortune world 500 have also operated in the country. It is obvious that most foreign banks are still keen on coastal cities, such as Shanghai, Nanjing, Guangzhou, Shenzhen, Tianjin, Dalian, etc, while many inland cities, excluding several top cities, such as Wuhan, Chongqing, Xian, their presence was rarely seen though these cities were on the governments opening outside list as well. Secondly, the business categories are extending quickly from foreign currency businesses to RMB businesses. In 1982, China government began to permit foreign banks to set up operating offices and conduct foreign currency businesses, their foreign money businesses have developed a lot ever since then. Currently, the main foreign exchange businesses of foreign banks covers financing business, loan and savings, international business settlement, investment, guarantee, business bills and consulting, etc. Then in 2002, some foreign banks were permitted to provide RMB business service to foreign customers in Shanhai, Shenzhen and Gaungzhou, and in fact, they extended this business to many foreign customers very quickly. Their customers were not only from those mentioned cities, but also from their neighbor provinces, such as Zhejiang, Jiangsu, Hunan and Guangxi. This fact witnessed that foreign banks have strong capability to expand their business. In February 2003, several top global giants, such as HSBC and Citibank, announced their grants of RMB businesses for Chinas domestic firms. Thirdly, the customers focus of foreign banks is mainly on first class joint ventures, multinationals, and Chinas big foreign-oriented firms, together with some public companies. Taking several top banks, for example, HSBC is keen on serving BP, Shell, Citibank focuses on GE, IBM, Software and Ford. The global banks are also very interested in such Chinas big state firms with oversea business, such as CNPC, Sinopech and COSCO. According to Chinas governments commitment, foreign banks are able to provide foreign exchange businesses for both domestic firms and residents early from Chinas WTO entrance, but the restrictions of areas and customers in RMB businesses will not be canceled until the end of 2006, therefore, the current competitions between Chinas banks and their global rivals are mainly reflected in foreign exchange businesses, especially concentrating on international business settlement and foreign exchange loan and savings, and the competing level is different in different cities. As the most advanced and international city in China, Shanghai sees most presence of foreign banks in this country, and the competition here is also most fierce. By the end 2002, there have been 53 operating foreign banks branches. 12 among which, including HSBC and Citibank, getting the permission of conducting comprehensive foreign currency businesses in the same year, covering both corporate banking and personal banking, local firms and local residents. A recent statistic provided by Shanghai Branch of Peoples Bank of China, showed that the growth rate of foreign currency savings of foreign banks had surpassed that of domestic banks in Shanghai in early 2002. Furthermore, some foreign banks in Shanghai have extended their businesses to the nearby provinces, including Zhejiang and Jiangsu, the most powerful economies of China. In the end of 2003, the total assets of foreign banks in Shanghai were about $27. 49 b, increasing by 35. 69% compared with a year ago. Total amount of loans were up to $12. 1b, growing by 15. 16% compared with 2002. Total savings was $7. 14b, growing at 56. 53%. In the same year, operating profit before tax of all foreign banks was $107m, in which the contribution of RMB business exceeded 50%, reflecting rapid growth of their RMB business. With the expansion of business and customers, foreign banks achieved great performance. In 2003, their market share in Shanghai banking sector in terms of total assets, savings and loans was 11. 84%, 3. 86% and 8. 64% respectively, much higher than a year ago. Shenzhen, as the symbol of Chinas opening to the outside world, owns the second largest scale of foreign banks in terms of both foreign currency assets and savings. Ever since the foundation of Shenzhen Branch of Hongkong Southsea Bank, the first foreign bank in the city, the amount of foreign banks has been growing. Up to early 2004, there were 25 foreign banks that have operating branches, together with 7 representative offices. The total staff of foreign banks are about 830, occupying 2. 6% of whole staff of Shenzhen banking sector. It was stated by Shenzhen Bureau of Banking Regulation, in the end of 2003, the total assets of foreign banks in Shenzhen were $7. 32b, total savings was $2. 33b. Thereinto, the absolute amount of savings enhanced by $0. 84b, with a growth rate of 55. 99% compared with last year. As a traditional financial center of North China, many eyes of foreign banks have turned to the city for years. By the end of 2002, there were about 14 foreign banks got presence in Tianjin, and 4 of which was authorized to conduct RMB business. Foreign banks firstly extended their international settlement business very quickly. In the end of 2002, market share of big four state banks in total foreign exchange assets was 82%, while foreign banks gained 0ver 10%. In terms of foreign currency loans, big four banks occupied 67%, compared with foreign banks 33%, which reflects Chinas domestic banks face heavy stress from foreign banks to compete in foreign exchange businesses.