Playing the long game in Asia

By many measures, ANZ is one of Australia's largest investors in mainland China – and that’s despite some pretty stiff competition.

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ANZ CEO Elliott talks about Australia’s economy and the mortgage market, RBA policy, and the lender’s strategy for regional markets. Source: Bloomberg

Some businesses just sell things remotely into this huge market. Whereas we have people on the ground doing things – meeting clients, talking to partners and striking deals every day.

"Having feet on the ground in Asia gives us real-time intelligence on vital capital flows which are the lifeblood of Australia’s economy.”

The bank has about 300 people spread across the major business hubs. Anyone familiar with ANZ’s history will not be surprised by this.

We have been in China since 1986 and in 2010 became the first Australian bank to be locally incorporated in the mainland. 

China is Australia’s largest trading partner and it’s worth restating our commitment to that country and to Asia more broadly. While it has always been an integral part of our DNA as a trade bank – some of the nuance can be lost when talking about the benefits of our presence there.

Having feet on the ground in Asia gives us real-time intelligence on vital capital flows which are the lifeblood of Australia’s economy. Our presence across Asia Pacific provides us with a lot of data and we look at it very closely.

Business conditions in the region are stable, and despite the fact the US and China have traded less in recent years, other economies have entered the supply chain.

As a bank we are increasingly diversified in our on-the-ground presence. Places like Japan, Vietnam and increasingly India are also crucial for us.

Globally this trend towards diversification is often dubbed the ‘China + 1’ strategy. Despite this shift China still plays a significant role in global supply chains.

It’s still an US$18 trillion economy that dominates the region. Maintaining the strength of our relationship with China reflects the modern ANZ, not just our history.

In a globalised world, we go where our customers need us. We intermediate trade and capital flows, dealing with the world’s largest companies and financial institutions – whether they’re from the United States, Europe, Australia or China.

We go where our customers go. Right now, there is enormous demand for our services in mainland China. Our business there is not shrinking – it is growing.

For example, in foreign exchange we acquired a new trial license to tap into USD-CNY clearing last year, complementing our existing AUD and NZ clearing business.

Sustainability race

We’ll continue to expand the scope of services offered to meet the changing needs of our client base – including in Hong Kong. We'll continue to invest in our platforms and capabilities in Hong Kong as well as mainland China.

When we think of China there are plenty of opportunities – particularly in the electric vehicle and sustainability space.

China’s commitment to reducing carbon emissions between 2030-2060 makes this clear. Already about 60 per cent of the world’s EV sales come from China and by 2030 it’s aiming for EVs to make up 40 per cent of all domestic car sales.

China’s total exports were up 7 per cent in the first two months of the year due to strong EV demand. And Chinese EV maker BYD toppled Tesla as the largest manufacturer in the fourth quarter of 2023 after record deliveries.

The notion of an ANZ retreat from Asia became overblown as we adjusted our strategy to focus on what we did best.

We moved away from retail banking in Asia to focus on institutional banking, which we do particularly well. And after significant reshaping, profitability has significantly improved and the business is delivering strong returns.

Eight years ago, when I started in the role of Chief Executive Officer, our international franchise had a return on equity (ROE) of about 3 per cent. Today that ROE is in the teens and sustainable.

Why is it more profitable and more sustainable? We focus on a smaller number of customers that align with our strategy. We now have 6500 institutional customers globally, many are other financial institutions and some of the world's biggest multinationals.

Success in institutional banking comes from knowing your customers really well.

Every day – across China and the rest the Asia Pacific – the institutional business is intermediating trade and capital flows for these clients. Our customers move goods and money around and we help them make that possible.

This can be everything from currency trades or the actual trade itself. As they invest in Vietnam, India, Japan, China or any of the 20-plus markets we operate in, we go there as well.

Shayne Elliott is Chief Executive Officer at ANZ

This article is an edited version of comments in an interview with Bloomberg News

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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