Over the past 3 decades China has developed into one of the most important markets and targets for investments in the world. Although China has been under scrutiny recently, this development is ongoing which is also reflected in the still increasing interest from companies from Erste Group’s home markets towards Asia, especially China. Austrian and CEE businesses have been relocating manufacturing and especially sales offices to China. In the other direction, Chinese companies and institutions are more actively entering the CEE market and investing especially into infrastructure projects (“One Belt One Road Initiative”), but also buying companies in the tech sector, the tourism and food/agricultural industry. The RMB has developed into the 5th most used payment currency and the 2nd most used currency for trade world-wide and is poised to become a global reserve currency following its inclusion into the IMF’s SDR basket.
In this context, the Financial Institutions Team in Erste Group, Christian Wolf, Head of Financial Institutions, and Christina Linzer, Head of FI Developing Markets & Southern Europe, as well as Oliver Hoffmann, Head of Asia, and Paul G. Bosbach, Head of Trade Business and Home Markets Asia in our Hong Kong Branch, share some insights into the Chinese banking sector and Erste Group’s capabilities to support our clients in Asia and especially in China.
What can our customers expect from Erste Group when they are considering working in China or have already some operations there?
Erste Group provides a wide range of products to support Austrian or CEE companies in doing business with China. For example, in trade and export finance we offer advising, confirmation and forfaiting of letters of credit, issuance of guarantees/standby letters of credit, collections, import/export invoice financings and export financings via Export Financing Schemes provided by Export Credit Agencies. Moreover, we offer payments in RMB, USD, EUR and other major currencies related to trade with China. Through our Home Markets Desk in Hong Kong Branch, we provide advice and support to clients wishing to invest in China and, vice versa, to clients seeking investment from China.
Do you have a local presence in China?
Erste Group Bank has a branch in Hong Kong with a full banking license which serves as our Group’s bridgehead in Asia; Hong Kong is a Special Administrative Region of China. With the newly established Home Markets Desk, our Hong Kong team can provide support to Erste Group’s home markets corporate clients in China and Asia as well as to Asian companies interested in Austria and CEE. Our 23 local colleagues have profound market knowledge, extensive contacts in the region and can bridge cultural differences. They speak Mandarin and Cantonese in addition to English and German.
If an Austrian company needs an account in China or financing for its subsidiary, can Erste Group do that?
Due to its lean structure, Erste Group’s Hong Kong Branch cannot offer standard corporate account services and instead concentrates on financing solutions. We have a wide network of selected Hong Kong and Mainland Chinese banking cooperation partners through whom we can help our corporate clients to open accounts and get on-shore financing for their Mainland Chinese subsidiaries (in CNY but also EUR and USD). Our Hong Kong branch can provide short to medium-term loans in CNH (offshore RMB) for utilization outside or – with the respective SAFE approvals in place - inside Mainland China, and we offer CNY/CNH hedging solutions. Together with our local partners, we also can arrange for CNH (Dim Sum) bond issuances.
Who are your partners in China?
We have excellent relationships with the major state- and larger privately-owned Chinese banks. We have established lines for more than 25 top Chinese banks which are centrally managed by the Financial Institutions team in Vienna. Our branch in Hong Kong maintains working relationships with many different branches of the Chinese banks all over China and Asia, as well as with government authorities, embassies, trade offices and trade associations - all with the aim to provide outstanding service and support to our corporate clients.
In addition to our correspondent banking relationships, we have concluded special cooperation agreements with some of the most reputable Chinese banks, like Industrial & Commercial Bank of China (ICBC) and Shanghai Pudong Development Bank (SPDB), as well as with Bank of East Asia (BEA) in Hong Kong, the latter is also a strategic partner of our Spanish shareholder Caixabank.
Given the size of the Chinese market, we have selected our partner banks according to their country-wide and regional importance, credit quality, and services offer.
Are Chinese banks interested in CEE?
Chinese banks established their presences in Western Europe a long time ago and in the past few years started to increasingly also enter Central and Eastern Europe. Only recently, Bank of China (BOC) opened branches in Vienna and Prague. ICBC has been covering CEE via its branch in Poland for some years already. China Development Bank (CDB) has opened offices in Austria and Hungary to cover CEE.
What is the role of China Development Bank?
China Development Bank (CDB) plays an important role in the Chinese national economic development, especially in infrastructure projects and pillar industries. In 2015, China e.g. signed deals with Hungary and Serbia related to the construction of a rail link between Belgrade and Budapest as well as a bridge over the Danube.
The Chinese Government announced some years ago “China's Twelve Measures for Promoting Friendly Cooperation with Central and Eastern European Countries“ which comprises a USD 10 billion special credit line for projects in such areas as infrastructure, high and new technologies, and green economy. Such initiatives provide a lot of support to investment projects in CEE, and CDB is the main Chinese policy bank involved in these projects.
Sourcing from China is globally increasing. How does Erste Group react to this development?
Our customers are increasingly sourcing from Asia, especially from China, and the links here get stronger and stronger. A perfect product for this is our Supplier Finance solution called ErsteConfirming. We can provide attractive financing conditions to Asian suppliers based on the credit rating of the buyers located in our home markets. Hence our customers are able to negotiate better prices and longer payment terms more easily.