For businesses trading with China (buying and/or selling goods), the key issues to be addressed are:
- Determining what currency should be used
- How to manage risk
- Adopting the best practice approach to working capital management
For businesses doing business in China (M&A, greenfield, brownfield investments in selected industries), the key issues to be addressed are:
- Understanding the FDI approval process, capital controls and equity limits
- Managing liquidity in China
- Repatriation of earnings and avoiding trapped cash
- Legal/regulatory/labor related issues
From our perspective, ANZ is uniquely placed to support Australian and New Zealand companies. We have the largest presence in China of all the Australian-New Zealand banks and we are the only such bank which is locally incorporated in China.
Our on-the-ground presence and network, with a dedicated Australia/NZ desk in China, builds on the well-developed relationships we have with key Chinese third party providers which we can introduce to our customers.
I have been with ANZ – after more than two decades at other international banks in China and the region – for nearly three years and in that time we’ve focussed intently on where we actually have a competitive advantage.
We are not a Chinese bank. We are not like HSBC or Standard Chartered or Goldman Sachs or Morgan Stanley.
When we consider that macro picture, even if GDP growth continues to trend down, China is still the economic hub of the region in both trade and capital flows.
China is the largest trade economy in the world. In 2016, China exported $US2.06 trillion and imported $US1.32 trillion, resulting in a positive trade balance of $US736 billion. A large proportion of China’s trade flows take place in the Asia Pacific region.
In an historic development, with its economic transformation, China became a net exporter of capital in 2014. The 2016 figure was $US170 billion and that has implications for a vast array of initiatives, whether it is the China-Australia Free Trade Agreement, the Belt and Road Initiative or internationalisation of the RMB.
Critically for ANZ, of China’s foreign direct investment (FDI), around 70 per cent takes place in the Asia-Pacific region – including Australia and New Zealand.
That really is the opportunity for ANZ, to participate in that universe. Our focus comes down to three types of organisation:
- Chinese companies with Asian ambition
- Chinese companies with global ambition
- Multi-national corporations with operations in China
In practice, that means a customer segment of companies which are not small or even smaller-medium; nor customers which are global giants. That smaller end is best served by domestic banks, that bigger end by the biggest global and investment banks. But that segment in the middle is, in itself, enormous.
Moreover – and critically – we find those segments do not have different risk profiles to what we are seeking. This is not a riskier proposition than the rest of ANZ’s business banking.
When we ask ourselves where we have a competitive edge, for Chinese companies with Asian ambition, ANZ’s footprint in Asia fits into these clients’ needs neatly so we could facilitate their trade and capital flows within our network.
Again, when we look at Chinese companies who are global players we ask “where do we have an edge?” We definitely have an edge for this type of client when they are targeting our specialised industries such as agriculture, resources and healthcare or when they have an Australia or New Zealand focus - where we do have strong capability and home markets advantage.
For ANZ targeted multinational corporations in China, we could be a specialised bank to provide product offerings and platforms to serve particular needs of their operations.
From a product perspective, we have a strong capability to help our clients with debt capital markets, cash and trade, and risk management in markets across the region. Overall, the target segment is not dissimilar: not small, not enormous.