China’s banking leader rejects fears over British exit from EU
- 18 June 2014
- From the section Business
Well, here's a surprise.
After a series of global business leaders insisting that Britain's membership of the European Union is an important part of their decision to invest in the UK, one of China's most senior financial figures has said it doesn't actually matter.
In an interview with the BBC, the chairman of China Construction Bank, Wang Hongzhang, said London was the leading centre for financial services in Europe, a position that would not be affected by any decision on Europe.
"Whether the UK will stay in the EU or not, will not do any harm to trade and economic ties or financial relations between the UK and China," he told me.
'Not an expert'
"We have a smaller world and everyone is connected with each other and it is the age of globalisation. I think [whether] the UK stays in the EU or not will not have an impact."
Disarmingly admitting that he is not "an expert" on the issue of Britain's relationship with the rest of Europe, Mr Wang's opinion will nevertheless be heartening to those who believe that the business and financial risk of leaving the European Union is overblown.
Campaigners who say that the UK would be better outside the EU argue that London would still flourish as a financial centre.
China Construction Bank (CCB) is a big beast. It is the country's second largest bank, valued at over $200bn (£118bn) with profits of close to $5bn (£2.95bn) a quarter. It accounts for more than 12% of all loans and deposits in China and is a major investor in property developments.
It is feeling its way into Western markets and has just been named as the first Chinese bank designated for offshore renminbi trading in London - a shot in the arm for the City's aspirations to be the major centre outside Hong Kong for dealing in the currency. That opens up new trading opportunities for UK and Chinese firms as deals can now be settled in London in local currency.
For details on why this matters, read more here.
Mr Wang said the offshore settlement deal was of "critical importance" and an "inevitable step" as China liberalises capital controls on its currency and seeks to play a more prominent role in the global economy.
Mr Wang also said it cemented London's place as the leading financial centre in Europe. Frankfurt or Luxembourg could have been other options but the City's long history as the place to "internationalise" currencies appears to have been the clincher.
Other Chinese banks are getting in on the action. Yesterday, the BBC revealed that the wholly state owned China Development Bank was interested in taking up investments in the UK's High Speed 2 project and new nuclear developments. The Agricultural Bank of China has also signed an agreement with the London Stock Exchange this week to facilitate trading opportunities.
Mr Wang said that CCB was similarly looking to expand in the UK and would be interested in "following any opportunities" on investment.
But rather than directly funding infrastructure projects, it seems that CCB is more interested in supporting businesses which trade in both countries - Mr Wang named the Chinese technology giant, Huawei, and the Indian-owned Jaguar as examples of businesses it could back.
"We will spare no effort to provide more financing to enterprises in the UK or in China," he said. Mr Wang wants the bank to "transform its overseas operations".
Some may fear the might of the Chinese banks - backed by a state which is sitting on a $200bn surplus. Could they not simply railroad struggling domestic competitors out of the way when it comes to picking the juiciest investment opportunities?
Mr Wang said such fears were unfounded, pointing out that CCB's operations outside China were still minor. "[We will] never surpass any local bank in the market," he said. "We are more complimentary to each other rather than competitors."
He cited the long history of banks such as HSBC and Citi in China which are still relatively small players.
Of course, China strictly controls how foreign banks operate in its country. In more open markets in the West, significant financial muscle could make expansion of Chinese banking interests both easier and more rapid.