Annual Survey | Stars Of China
Something’s changed this year. Midmarket innovators are taking the lead, Internet companies are now world-beaters, and banks are staking their ground in a whole new way.
Chinese ecommerce platform Alibaba’s $25 billion initial public offering on the New York Stock Exchange roared to life in mid-September. The IPO was a financial industry high-water mark—the biggest ever—and a challenge to the shopworn notion that all Chinese companies are weak innovators.
No one is equating Alibaba with Google or Amazon, but what the Hangzhou-based company founded by Jack Ma can do is take elements of innovation by global companies and make them work in China—far better, it seems, than any foreign multinational is capable of doing.
Meanwhile, banks are vying in an intensely competitive market. Traditional banks are answering the challenge by Internet upstarts like Alibaba by innovating in ways that break the mold.
In the following pages, Global Finance names the leaders in this energetic phase of China’s development—and the banks that support their vision.
CLICK TO JUMP |
|
|---|---|
BANK WINNERS |
CORPORATE WINNERS |
BANK WINNERS
CITY COMMERCIAL BANK
Harbin Bank
Harbin Bank, based in the northeastern Chinese city of Harbin, tapped Hong Kong’s capital markets in March, raising $1.1 billion. The IPO was priced at the lower end of its projected range, with investors wary of the asset quality of China’s banks in general. However, Harbin’s nonperforming loan ratio to total loans was a mere 0.86% in September. Once the bank jitters end in China, shareholders may be rewarded.
CONSUMER BANK (DOMESTIC)
ICBC
Like its mainland Big Four peers, ICBC is having issues with new economy lenders like Alibaba and Tencent. It restricted trade with these ecommerce upstarts earlier this year. Meanwhile, it has upgraded its Internet banking. In the past 18 months ICBC won new retail customers by implementing a customer recognition system and introduced what it calls “full-scale” marketing of personal financial products, seizing an even broader customer base. ICBC is taking its consumer banking prowess overseas. In October, it received approval to initiate banking services in Myanmar alongside three Japanese megabanks.
CONSUMER BANK (FOREIGN)
Citi
Citi’s business in China is going great guns. One of the first banks to open its doors in the Shanghai Free-Trade Zone, Citi earns about $1 billion in annual revenues in the country. Always a major presence in Asia, Citi now draws about one-quarter of its regional revenues from China. It boasts 52 consumer banking outlets in 13 cities and has also opened four lending companies. Citi has improved offerings for more affluent customers, wrapping together premium services to build strong customer loyalty.
CORPORATE GOVERNANCE
China Merchants Bank
The sixth-largest commercial bank in China by assets, China Merchants Bank has earned higher marks than its peers for disclosure during this period in which concern over bank credit quality has reemerged. Moody’s upgraded China Merchants Bank, based on such criteria as its relatively low cost of funds compared with other large Chinese banks. The clarity of its disclosure and confidence in its governance system is behind regulatory approval for China Merchants Bank to use an internal ratings-based approach for credit risk weightings under Basel III, beginning in 2015. It is only one of six domestic banks to earn the privilege.
CORPORATE BANK (DOMESTIC)
ICBC
ICBC is the backbone lender to domestic corporates that are reshaping China’s economy. Some 76% of its corporate loan portfolio involves loans extended to advanced manufacturing, modern services, cultural industries and strategic emerging industries. The bank also ramped up its green economy lending to projects that meet environmental protection standards. ICBC recently integrated diversified financing instruments like financial leasing, short- and medium-term notes and syndicated loans to reduce overall financing costs for enterprises.
CORPORATE BANK (FOREIGN)
DBS Bank
In the past 18 months DBS Bank used its strength as a leading Asian bank to tap its offshore counterparts and offer one-stop banking solutions in China. It provides domestic clients with access to China and offshore financial markets in products such as working capital financing, equipment financing, acquisition financing, capital expenditure financing, cross-border financing, cash management and treasury and debt and equity fundraising. A signal of its rising dominance in Chinese corporate banking: In 2013, DBS Bank helped arrange the $8 billion syndicated loan facility for Alibaba Group, which was the largest corporate facility in Asia ex-Japan that year.
COMMERCIAL CORPORATE CREDIT CARD
ICBC
ICBC has introduced an array of dual currency credit cards, including its popular Dual-Currency Business Visa Credit Card. It has teamed up with UnionPay to offer a variety of dual currency cards, including one targeted at employees of a Chinese state enterprise in Singapore. In response to the credit crunch experienced by smaller businesses in China, this year ICBC introduced a card designed for small and micro enterprises, leveraging new big-data capabilities to support risk management of credit card loans.
CONSUMER CREDIT CARD
Deutsche Bank/Hua Xia Bank
Hua Xia Bank, Deutsche Bank’s partner in China, is a midsize lender that has cut an impressive niche in the consumer credit card market. Consumer credit card wars have heated up in China this year, but Hua Xia’s Pretty Lady Card has turned out to be the most popular with young, affluent women. Cardholders can earn points that link to fitness clubs, cosmetic retailers and even discounted health insurance.
CROSS-BORDER PAYMENTS (DOMESTIC)
Bank of China
Bank of China (Hong Kong) is the largest renminbi-participating bank in Hong Kong, and one of the largest in the world through its global branch network and links with correspondent banks. Its parent, Bank of China, has the largest market share in international trade settlement in mainland China. It is also the lead underwriter and distributor of offshore renminbi bonds issued by sovereign institutions, policy banks, multinationals and growing Chinese companies, making it a leading force in internationalizing the renminbi.
CROSS-BORDER PAYMENTS (FOREIGN)
Citi
An early entrant into the Shanghai Free-Trade Zone, Citi piloted the world’s first cross-border netting structure in China. The structure allowed Roche to use its Shanghai FTZ entity to consolidate all renminbi cross-border transactions from domestic participating companies and settle on a net basis with the company’s offshore treasury center.
DEBT CAPITAL MARKETS (DOMESTIC)
CITIC Securities
The nation’s largest brokerage and also one of its biggest domestic bond issuers broke the mold in 2013 with its first international bond offering, an innovative $800 million offering linked to a standby letter of credit. The use of the SBLC allowed CITIC to come to market for its first overseas listing without lengthy regulatory approval, squeezing into a closing issuance window and achieving lower funding costs.
DEBT CAPITAL MARKETS (FOREIGN)
SC Lowy
This relatively small, Hong Kong–based global fixed-income specialist was launched only five years ago, when its co-founders, Michel Löwy and Soo Cheon Lee, left Deutsche Bank to start their own firm. It recently made its entry into debt capital markets as joint bookrunner in this year’s $125 million, five-year bond for Hong Kong–listed real estate developer Redco Properties. The firm’s blue-chip client list suggests the emergence of a tough, new challenger to the bulge brackets.
EQUITY CAPITAL MARKETS (DOMESTIC)
China Securities
Not exactly a household name internationally, China Securities and its recently opened Hong Kong unit, China Securities (International), has made global investment banks take notice. In the first half of 2014, China Securities was the top Chinese-based bookrunner in Dealogic’s league tables in equity capital markets, beating HSBC and J.P. Morgan.
EQUITY CAPITAL MARKETS (FOREIGN)
Goldman Sachs
Goldman Sachs led all global equity capital markets activity in 2013. China was no exception. The New York–based investment bank scored first place as 2013 underwriter in Thomson Reuter’s league tables for Asia ex-Japan equity issuance, including Chinese A-shares.
FOREIGN EXCHANGE PROVIDER (DOMESTIC)
Bank of China
As a primary clearer of international renminbi payments in China, Hong Kong and most overseas markets, Bank of China is a dominant player in overseas renminbi markets. It retains its top spot in Stars of China because of its expansion of integrated trade finance and supply chain offerings with new forex products and services launched since 2013.
FOREIGN EXCHANGE PROVIDER (FOREIGN)
Citi
Citi has leveraged its Asia-wide presence to focus on key regional corporate clients, including Chinese corporates internationalizing in Southeast Asia. Citi continues to invest in cutting-edge forex and ecommerce technology. Clients cite the bank’s first-rate forex research and market coverage in China as well as India, Indonesia, Philippines, Taiwan and Thailand.
INFRASTRUCTURE LENDING/PROJECT FINANCE (DOMESTIC)
Bank of China
Bank of China has extended its push in Africa this year, where it is gaining on rival ICBC. Meanwhile, on its home turf, its selective approach to projects has led to sturdier credit quality in its infrastructure lending assets than its Big Four rivals.
INFRASTRUCTURE LENDING/PROJECT FINANCE (FOREIGN)
ANZ Group
Australia and New Zealand Group has been in China since 1987. Earlier this year it agreed to operate as an adviser to China Development Bank on its investment and lending decisions in Australia, where the Chinese policy bank is looking to invest in infrastructure projects to extract resources.
INNOVATIVE BANK
China Construction Bank
China Construction Bank was a lead innovator in more than a dozen custody categories from 2013 to 2014. It qualified as a custodian for Ping An Insurance’s stock index futures trades. It also developed special service arrangements to address the investment and operating needs of a popular gold-exchange-traded fund product, ensuring the completion of trade-plus-zero settlement of the product between Zhongdeng China and Shanghai Gold Exchange.
INVESTMENT BANK (DOMESTIC)
CITIC Securities
Last year CITIC Securities closed on its acquisition of Hong Kong–based brokerage CLSA Asia-Pacific Markets from Crédit Agricole for $1.25 billion, adding CLSA’s global research capability to CITIC’s impressive Chinese reach. The return of the IPO market this year prompted its fastest earnings growth for any first-half period in the past eight years.
INVESTMENT BANK (FOREIGN)
UBS
UBS participation in Chinese deals tapered off since it was disclosed that the bank lent $5.5 billion to a Thai company, Charoen Pokphand Group, to acquire a 15.6% stake in Ping An Insurance in 2012, after a major Chinese bank dropped out. However, UBS still scored the advisory of China National Petroleum’s $5 billion purchase of an oilfield in Kazakhstan. It scored top place for full-year 2013, according to Thomson Reuters, as bookrunner for Asia ex-Japan IPOs.
Mergers and Acquisitions (DOMESTIC)
China International Capital Corp
Although shaken by the recent announcement that Levin Zhu, head of CICC and son of former premier Zhu Rongji, would step down, CICC is not likely to shed its position as the powerhouse M&A mainland investment bank. In 2013 CICC was adviser to the Midea Group merger with parent Midea Holdings and subsequent A-share issuance worth a total of $5 billion, which helped the appliance maker (and former Stars of China winner) become a global player.
Mergers and Acquisitions (Foreign)
Morgan Stanley
The Wall Street investment bank was behind the $4.7 billion takeover of US pork producer, Smithfield Foods by China’s largest pork producer Shuanghui International Holdings, in 2013, the largest Chinese takeover of a US company so far. In October 2014, Morgan Stanley reshuffled its top management, naming James Tam, a leader of the Smithfield deal, co-head of Asia-Pacific M&A along with Richard Wong.
MUTUAL FUND
Tianhong Asset Management
Tianhong Asset Management has grown China’s biggest money market fund by assets in less than a year, following the launch of its fund platform, Yu’E Bao, with Alipay in June last year, in affiliation with ecommerce provider Alibaba.
WEALTH MANAGEMENT SERVICES (DOMESTIC)
China Merchants Bank
China Merchants Bank opened its first offshore private banking center in Hong Kong in August, via its local subsidiary Wing Lung Bank. CMB is tracking the spreading wealth of high-end clients on the mainland, managing family trusts and carving out a niche in looking after wealth for the second generation of China’s super-rich.
WEALTH MANAGEMENT SERVICES (FOREIGN)
Standard Chartered
Earlier this year, Standard Chartered announced that it was selling its Swiss-based private banking unit to focus on its private banking activities in Asia, where it is a major leader in markets like Hong Kong and China. Richard Pattle, head of Standard Chartered’s ultra-high-net-worth division in London, was appointed to head Asia in October this year, underscoring the bank’s intensified focus on China.
RURAL FINANCE (DOMESTIC)
China Construction Bank
Three years ago, China Construction Bank and Spain’s Banco Santander joined forces to provide banking services outside China’s major cities. The venture specializes in investing and managing village and town banks. The move has placed CCB at the forefront of the nation’s countryside lending.
RURAL FINANCE (FOREIGN)
HSBC
A pioneer foreign bank in rural lending in China, HSBC became the first foreign bank to begin lending in Shandong province in 2011. Today HSBC has 24 rural banking outlets via 12 rural banks. HSBC is at the forefront of banks working to develop a sustainable model for rural finance in the hinterland.
SUBCUSTODIAN BANK (DOMESTIC)
ICBC
ICBC started offering custody services in 1998 and now holds the biggest market share of its Big Four rivals. In addition to a full menu of custody products, the bank has focused on emerging services such as asset management plans for brokers and equity investment funds. ICBC is also the first bank in China to offer customized value-added services such as performance evaluation of managers and risk management.
SUBCUSTODIAN BANK (FOREIGN)
HSBC
HSBC China offers subcustody and clearing services to foreign institutional investors in China’s B-share market and Qualified Foreign Institutional Investors (QFIIs) in China’s A-share market, currently holding the largest share in both markets.
SMALL BUSINESS LENDING (DOMESTIC)
China Construction Bank
China Construction Bank saw slower revenue growth and marginally declining credit quality in the first half of 2014. But its small- to medium-enterprise loan quality is better than its peers’. It has been an innovator in risk management of small business loans. Its fast-track SME loan service is an important source of credit to SMEs.
SMALL BUSINESS LENDING (FOREIGN)
Standard Chartered
Standard Chartered is not only a major lender to Asia’s small businesses but an advocate for better lending services generally for SMEs. The bank is a pioneer in offering supply chain financing to smaller companies, facilitating their entry into cross-border markets. This more holistic approach supports company ecosystems, ensuring greater stability for individual firms.
SUPPLY CHAIN FINANCE (DOMESTIC)
Bank of China
Bank of China has developed a holistic approach to supply chain finance that is unique among its mainland peers. Its trade finance services are calibrated by measuring supply chain flows for various members, with core enterprises as the starting point.
SUPPLY CHAIN FINANCE (FOREIGN)
Standard Chartered
Standard Chartered’s supplier finance and buyer finance programs use proprietary credit models to analyze specific supply chain interrelationships between clients and their suppliers/buyers with parameters that measure the strength of the supply chain. This approach, which is a departure from traditional, stand-alone risk evaluation, has allowed the bank to introduce a range of innovative products.
TRADE FINANCE (DOMESTIC)
Bank of China
Bank of China (Hong Kong)’s Trade Services Center has strengthened its offering under BOC Corporate Banking Services Online, including enhancement of import and export services and the launch of repayment and guarantee services. BOCHK is able to draw advantage from the extensive mainland and global network of its parent company, Bank of China.
TRADE FINANCE (FOREIGN)
DBS Bank
Trade finance is a strategic focus of DBS’s Global Transaction Services business in China, and has been growing rapidly. GTS’s trade revenues are forecast to end 2014 24% higher year-on-year, with a compound annual growth rate of 63% in trade revenues over the past four years. DBS has built a reputation of developing innovative trade finance solutions amid fast-paced market changes, regulatory shifts and treasury management trends.
TREASURY AND CASH MANAGEMENT BANK (DOMESTIC)
ICBC
ICBC is among the most sophisticated of the Chinese Big Four in cash management. The first Chinese bank to launch global cash management from China, it has cash management centers in Hong Kong, Singapore, Paris, Toronto and South Africa. The core information systems of eight ICBC overseas branches and ICBC Asia were centralized in an overseas data center.
TREASURY AND CASH MANAGEMENT BANK (FOREIGN)
DBS Bank
DBS’s treasury and markets business in China achieved over 50% revenue growth year-on-year in 2013. With the regulations permitting onshore customers to sell renminbi FX options, DBS was one of the first banks in China to develop and launch FX-hedging products containing an option structure.
CORPORATE WINNERS
AIRLINE
China Southern Airlines
A depreciating renminbi took a bite out of the earnings of China’s three biggest airlines in the first half of 2014. Meanwhile, local carriers increased air traffic growth. China Southern Airlines saw the strongest underlying growth, carrying 47 million passengers in the first half of this year, an increase of 8.2% from a year earlier.
AUTOMOTIVE
Dongfeng Motor
The popular auto manufacturer is taking its aggressive brand of marketing to affluent customers, setting up a 50-50 joint venture Dongfeng Infiniti Motor with Japanese carmaker Nissan Motor that will see Dongfeng manage the luxury Infiniti brand in China.
CONSUMER PRODUCTS
Metersbonwe Group
Known as the “Gap of China,” Shanghai-based fashion and accessories company Metersbonwe has grown quickly, with approximately 5,000 outlets across the country. The company’s founder, former tailor Zhou Chengjian, has pledged to go global within the next three years.
CONSTRUCTION
China State Construction Engineering
The builder of the iconic National Aquatics Center for the Beijing Olympics, otherwise known as the “water cube,” has gone global with its construction of the Baha Mar Resort in the Bahamas.
ELECTRONICS
Huawei Technologies
Huawei has shifted its focus to the mobile-device market in recent years and has made a bold move into fixed broadband, saying it will invest more than $4 billion in R&D in the technology over the next three years.
FOOD AND BEVERAGEs
Yili Group
China’s biggest milk producer by revenue, inner Mongolia’s Yili has recovered admirably from its tainted-milk episode in 2012, winning back customers’ confidence in the quality of its brand. First-half 2014 profits were up 32% to $374 million year-on-year.
INSURANCE
Ping An Insurance
Ping An is a noted innovator in insurance in China—it even offers a smog-insurance package to citizens struggling with the nation’s polluted air. The firm’s first-half profits were bolstered by growth in premium income and higher profit from its banking operations.
MEDIA
Baidu
The leading Chinese language Internet search provider is wasting no time in going global. In May this year Baidu announced that it would open a lab in Silicon Valley to bolster its existing development capabilities in the California high-tech cluster.
METALS & MINING
Chalco
Aluminum Corporation of China, known as Chalco, is a major force reducing China’s dependency on foreign commodities. With record output in 2013 reaching 23 million tons, China now has little need for imports of aluminum from global markets. Lower commodity prices, however, pushed Chalco into a first-half net loss.
OIL & GAS
PetroChina
China’s biggest listed oil company by capacity improved its results in its refining and chemicals businesses. The government raised retail natural gas prices by 15% last year, fortifying PetroChina’s bottom line.
PROPERTY AND REAL ESTATE
China Vanke
China Vanke is the world’s largest property developer by revenue. It has managed the downturn in property prices well, focusing on greater demand for housing sales in China’s larger cities.
RENEWABLE ENERGY
Yingli Green Energy
Yingli’s solar panels powered the Maracanã football stadium in Brazil for this year’s Fifa World Cup. Still running at a loss, it is the mostly likely of China’s solar providers to survive the recession in its industry.
STEEL
Jiangsu Shagang Group
Facing industry overcapacity in China and declining steel output, Shagang, one of the nation’s largest steelmakers, refused to drop prices and throw the sector into a price war. The company has a stated ambition to be a global steel provider like India’s Mittal.
TELECOMMUNICATIONS
China Telecom
New subscriber additions are down generally in China, but China Telecom will get a shot in the arm now that it has won a license to commence its 4G hybrid network trial in 16 cities across the country.
