CBA to open county bank in rural China

THE Handanxian County Bank in Hebei province will specialise in small business and agricultural lending.

THE Commonweath Bank will today open a new county bank in rural China as its attempts to build an extensive network to capitalise upon the nation’s next phase of regional economic growth.

The Handanxian County Bank in the Hebei province, which surrounds the Beijing municipality, will specialise in small-to-medium businesses and agricultural lending and is the 15th bank of its ­nature that CBA has opened in the past three years.

CBA, Australia’s largest bank by market capitalisation, also has two sub branches in the Henan and Hebei provinces as well as its two major branches in Beijing and Shanghai.

Head of international financial services Simon Blair said CBA was focusing its Chinese expansion plans on regional areas where it believes future growth would remain strong, despite ongoing concerns over the economy.

Lending growth in the county bank network increased by 137 per cent in the past year, while deposit growth was up by 97 per cent.

Under the current structure, CBA owns the first five county banks outright and holds 80 per cent of the remaining 10 located in provinces that specialise in farming and agricultural production.

“We have focused our strategy on areas where there is size — there are 75 million people in the Hebei province — and areas where there is strong economic growth,” Mr Blair told The Australian.

“We have also specifically looked for areas where we thought we could add value. We already do small-business lending very well and that is why we have focused on that and agricultural lending.”

County banks have been developed in China over the past nine years, specifically to concentrate on agricultural lending in rural provinces.

The Chinese government set a target that the national economy would grow by 7.5 per cent this year. However, there are ongoing concerns among investors and ­financial market economists over the growth rate in cities and provinces outside of Beijing and Shanghai.

There are concerns over Hebei, given that the province is the largest steel-making region in China and the government had ordered steel production be drastically reduced to help solve the nation’s pollution crisis.

“The provinces where we are located now have been performing very soundly,” Mr Blair said.

“If you take away the past year and look at the previous four years, both Hebei and Henan were very strong in terms of growth. The cities are developing very rapidly and you have to say today that both don’t look anything like they did four years ago.”

Mr Blair said CBA had put in place the same loan approval systems in China as it did in Australia, especially for small-to-medium business lending.

China’s banking system is tightly controlled by the state, which regularly directs banks and offers incentives to increase lending to particular sectors to support economic growth.

However, Mr Blair said CBA’s county banks were never pressured to approve loans. “The credit quality and the non-performing loan rates we see in China are very similar to Australia, especially for small-to-­medium business. I can tell you no one has ever pressured us to lend to anyone.”

Mr Blair said the county bank network was keen to grow its retail deposit base to fund future loan growth.