Annual Survey | Stars Of China
Nothing has characterized the recent pressure on traditional banking in China more than the challenge posed by Internet companies to the Big Four Chinese Banks
This year’s Stars of China coverage comes amid a season of change in the banking sector. It has not been a placid year for Chinese banks. In the past 12 months, “shadow banking”—financial instruments sold outside the banking system—continued to grab headlines, as credit rating agencies and analysts tried to gauge the actual threat to the system that these assets could create.
The first tacit government bailout of a shadow asset (Credit Equals Gold No. 1 Trust) occurred via a loan from ICBC to trust product seller Huarong Asset Management.
But asset quality in China’s banks is perennially overblown. The most remarkable event in China’s recent banking history is the challenge that Internet companies present to the banks, effectively forcing liberalization onto the table.
Alibaba’s ecommerce success—and the energetic rise of ecommerce companies like Tencent, Baidu and Alibaba-owned Taobao—is a signal that the Chinese market is maturing in unexpected ways. Alibaba’s Yu’E Bao—an online investment fund— was a shock to a complacent banking system.
Customers began deserting the Big Four Chinese banks to deposit their money with Yu’E Bao, which offered higher interest rates for deposits than the traditional banks. In March this year, the Big Four had had enough and began to impose limits on the amount of money customers could transfer to Alipay, Alibaba’s online payment unit. Jack Ma, Alibaba’s founder and chairman, fired back, saying that consumers, not monopolies, should determine the market.
All of this played out, even as the Big Four—represented in this year’s Stars of China by ICBC, Bank of China, and China Construction Bank (Agricultural Bank of China is among China’s Safest Banks)—were busy sharpening their consumer banking competitiveness and vying hard to improve services for corporate clients.
Perhaps it was DBS Bank, the Singapore-based, China-savvy financial institution that made the most out of the new environment, seizing the Best Corporate Bank award for the first time in China (last year DBS Bank won Best Consumer Bank).
Neil Ge, chief executive of DBS Bank (China), told Global Finance, “To adapt to the needs of a dynamic and diverse Chinese market, we have set up specialized teams within our large corporate clients’ segment, to service different profiles of clients in China.”
The bank also moved to become a conduit for Chinese corporates, who are increasingly seeking funding alternatives. “Chinese corporates are getting more sophisticated and are increasingly looking toward both onshore and offshore financial markets for funding to improve their balance-sheet funding efficiency,” says Ge.