Bank Of Singapore Tilting Towards JV As Way To Enter Onshore China Market - Report

Tom Burroughes

28 July 2016

, part of Oversea Chinese Banking Corp, is looking to work with an onshore Chinese partner rather than directly enter the market in the world’s second-largest economy, its chief executive said, according to a media report.

However, Bahren Shaari told the South China Morning Post that his bank is not rushing to make a decision.

“Shanghai is something we have in mind. There is no fixed location. You set up in a location where the money is,” Shaari was quoted as saying. “Client acquisition is still going to be a challenge even if you have an onshore set-up." He added that the bank “will need to find bankers to hunt for clients”.

For many years, foreign-based firms looking to build business in mainland China have had to accept the joint venture option. Western banks have shown mixed behaviour in terms of their desire to enter, remain in or leave JVs. For example, UBS last year increased its stake in its Chinese securities unit to nearly 25 per cent. Performance of Western banks' joint ventures in China has also been uneven. In May, Russell Investments withdrew from its partnership with Chinese insurer Ping An. JVs have also raised issues such as the duration of such arrangements and ways of protecting intellectual property rights – at times a sensitive issue for Western firms fearful of losing IP to Chinese partners. (For more on this issue, see here.)

It was reported more than a month ago that Bank of Singapore was contemplating an onshore presence in China.

Bank of Singapore may be one of several major lenders looking to set up an onshore presence in China, as the world's second largest economy continues to open up to foreign investment. Earlier this week, for example, London-headquartered Standard Chartered said it would consider next year whether it should launch an onshore private bank in China.

Shaari was also quoted saying that he expects more M&A activity to happen in the banking world. “The consolidation will continue. Each bank will need to find a unique business model. Whatever model you run, the cost base must be manageable to support the top-line revenue. The top-line revenue is not growing as much as in the past, especially this year,” he said.