Headed for Europe

Maersk’s CFO recently obtained a big loan from a Chinese lender. Though still rather unusual, funding from Chinese banks to European companies is set to surge. Finance chiefs should start memorising names such as ICBC, CCB and BOC. Even pure onshore banks such as the CDB are on the rise.

While the refrain of China taking over the world has become a common one, a new verse has been added to the song: that of Chinese banks funding European companies. In what is likely to become an increasingly common activity for European chief financial officers, Trond Westlie, CFO of Danish shipping company Maersk, recently signed a USD 500 million (EUR 400m) contract with China Development Bank’s (CDB) vice governor Gao Jian to buy containers from a Chinese manufacturer. This has brought Maersk’s total amount raised through CDB to USD 1 billion.

Chinese banks’ growing role in Europe is nothing more than an expansion of the increasingly active financial part they have been playing in other overseas economies. One case in point is Australia, where Chinese banks, together with their Japanese counterparts, account for about 21 percent of new syndicated loan issuance year-to-date and have seen substantial growth in volumes, according to Bank of America Merrill Lynch, mostly grabbing market shares from retreating European banks.

But for Europe, the arrival of potent banks from outside the US and Europe itself is a completely new thing. The weakness of the European financial industry, in particular, has opened up attractive opportunities for Chinese (and other) lenders in one of the world’s most competitive financial services markets.

Chinese institutions operate with unprecedented power, accounting for almost one third of global bank profits last year, up from 4 percent in 2007, according to the Banker magazine’s latest annual rankings, with Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), and Bank of China (BOC) taking the list’s top spots. Even pure onshore banks such as CDB have vastly increased their overseas activities. CDB’s overseas lending shot up from RMB 155 billion (EUR 20bn) in 2006 to RMB 935 billion last year. “CDB has been involved with a string of high-profile overseas transactions lately, which have put it firmly on the map,” says John Shum, a partner in law firm White & Case’s Hong Kong office.

Article from: CFO

Read the entire article herepdf220.6 kB

EY refers to one or more of the member firms of Ernst & Young Global Limited (EYG), a UK private company limited by guarantee. EYG is the principal governance entity of the global EY organization and does not provide any service to clients. Services are provided by EYG member firms. Each of EYG and its member firms is a separate legal entity and has no liability for another such entity's acts or omissions. Certain content on this site may have been prepared by one or more EYG member firms