With the economic downturn making foreign assets cheaper (despite the renminbi’s recent fall against the euro), there’s been lots of talk of Chinese making investment abroad. A Bank of China subsidiary in Hong Kong, Bank of China International Holdings (BOCI), has set up a private bank in the territory to give wealthy Chinese business executives and entrepreneurs access to foreign-denominated investment options. And the bank has been pretty successful, attracting US$6.2 billion in assets since it started marketing the service earlier this year.
But it may be the security of BOCI’s links to the mainland, not its window to foreign markets, that makes BOCI’s private banking services so attractive. Hong Kong residents have made up approximately 60% of BOCI’s private banking clients, attracted by BOCI’s links – via Bank of China – to Beijing, which they see as giving the bank extra insurance against any major drops in the stock market. To Hong Kong investors, that gives BOCI an edge over foreign banks, many of which had their stocks tank at the height of the downturn last year.
This brings into question what Bank of China’s real goal is in heading overseas (it also has branches in the UK and a private bank and fund management subsidiaries in Switzerland). While it may appear on the surface to be about following Chinese investors abroad, the evidence in Hong Kong seems to suggest Chinese banks can benefit as much from being a bridge to mainland China as one to the outside world.