China’s Big Four converge on Australia

China’s big banks are doing their utmost to fill the vacuum left by the withdrawal of European bankers from Australia.

Chinese banks are targeting Australia’s syndicated loan market. Syndicated loans require several banks to provide capital. They are the most common form of finance for capital intensive large scale mining and energy projects in Australia.

Asian banks, mostly Chinese and Japanese, took some 21% of new syndicated loan issuance in Australia in the year-to-date, up 4% from a year earlier. This market share has been wrested from European banks that have cut down lending by half.

State-owned Industrial & Commercial Bank of China Ltd., China’s biggest bank and the most profitable in the world, has lent US$860 million, up almost a third from a year ago. Since 2008, the bank has financed some US$15 billion worth of business in Australia.

ICBC is one of China’s “Big Four” banks, all of which are state-owned.

Han Ruixiang, head of Australian operations for ICBC, said ICBC plans to remain in the market for corporate banking instead of competing against Australia's leading domestic retail banks.

"We have a strong interest in resource deals but we're not focusing only on them. As a commercial bank we lend across the board," Han said.

ICBC’s interest in resources is not without basis. Australia expects resources projects in the pipeline will need investments of US$451.4 billion to complete. China, largest trading partner, accounts for over 60% of Australia's exports of mainly iron ore and coal.

ICBC has provided funding for the US$5.7 billion development of the desalination plant in the state of Victoria and major coal loading projects in the port city of Newcastle and Queensland.

Another Big Four bank, China Construction Bank Corporation, has made its entry into the Australian loan market with US$80 million of debt on its books by April 3 compared to nothing in 2011. Another Big Four player, Bank of China Ltd., increased its gross loans and advances by a quarter to US$5.12 billion in April.