Meet Your New Local Banker - China

June 14th, 2007

By Vitaliy Katsenelson, CFA

The Financial Times reports China’s largest bank, ICBC, announced its intentions to get into the banking business in the US. That move actually makes sense. Politicians already started making waves about China owning a good chunk of the US through its government debt (an idiotic rhetoric, but it is a topic for a different discussion). The Chinese are thinking instead of making loans to the US government and getting paid a barebones rate. Why not help the US consumer to get further into debt and make a juicy profit in the process? Good thinking.
The best part is that politicians will have a hard time blocking the Chinese foray into banking (though they’ll try). If the US blocks the Chinese entry into US banking, China is likely to reciprocate (I would not blame them) and thus American banks’ grandiose ambitions to drown 1.2 billion Chinese in credit card debt will be crashed.
I doubt that you’ll see ICBC branches around the corner anytime soon, but I think the acquisition of a large US bank would make a lot more sense – you get instant scale, American know-how, and you can self finance much higher yielding consumer loans from trade surplus. Call me crazy, but that is what I would do.

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Entry Filed under: Analysis & Research

3 Comments Add your own

  • 1. offthebeatenpathinvestmentsforum  |  June 15th, 2007 at 4:05 am

    Vitaliy — you bring up an interesting point and I agree with you that if ICBC wants to get into this business in the U.S. in a big way they probably will. Look at Citgo or Lukoil, I was in New Jersey for the first time in 4 years and Lukoil is everywhere. Why not Chinese owned banks?

    I recently discovered your site and was reading some of your older posts. The post on U.S. chicken producers brought back some not so fond memories of standing in line for “noshky busha.”

    I recently started my own blog and would be interested in your thoughts …. www.offthebeatenpathinvestments.blogspot.com

    -keep up the good work

  • 2. Vitaliy  |  June 15th, 2007 at 5:57 pm

    Thank you very much. I don’t have any problem with Chinese owned banks. Not at all. I’ll check out your website. Take a look at the post I wrote a long time called “Feeding Chicken with Fish”.

    Best,

    Vitaliy

  • 3. M. Toscano  |  June 18th, 2007 at 10:14 am

    I agree that Us will not be able to stop ICBC enter in US. They’ll need long time but they’ll enter. And if Us will forbid the entrance, China will reduce the purchase of Treasuries, or will make more expensive for multinational companies to operate in China.
    China in the Us….a new future: sign of globalization

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