Chinese banks’ foreign expansion “irresistible”

A Chinese professor at Yale University believes the acquisition of control over Bank of East Asia by the Industrial and Commercial Bank of China and its financial partners will be the first of many by Chinese banks.

Chen Zhiwu, a finance professor at Yale, said Chinese banks were undergoing a “strong expansion phase” to support overseas expansion by Chinese business firms.

More Chinese business expand abroad will demand Chinese banks open branches abroad to provide a better financial services. The internationalization of the renminbi also help China banking foreign push.

He noted the strong expansion pace of China banking abroad is mainly due to three favorable factors:

Foreign trade growth has pushed the financial demands on Chinese banks, including traditional trade payments forward.

Demand from financial organizations that Chinese enterprises develop abroad since Chinese banks are more familiar with Chinese enterprises.

Many European and U.S. banks have become potential M&A targets because of their weakening due to the Eurozone and debt crises.

In the long-term, it is an “irresistible trend” for China’s banks to expand abroad, said Guo Tianyong, director of the Banking Research Center of the Central University of Finance and Economics.

Following the ICBC buy-in, the Federal Reserve Board also approved requests by the Bank of China and the Agricultural Bank of China to set up branches in Chicago and New York.