A remarkable international opportunity beckons for China's banks. The Chinese banking industry has come of age in the past decade and, in financial terms, already ranks as a formidable force. However, Chinese banking is still essentially a domestic business which has grown and flourished on the back of China's burgeoning economy. The big question now is: Can Chinese banks capitalise on their domestic financial strength to become global leaders in the international banking arena?
There is a long way to go - and plenty of pitfalls that will require multidisciplinary leadership to navigate - but there is no denying the opportunity. While the Western banking industry is confronting the trauma of the 2008 financial crisis and the current problems afflicting the euro zone, the Chinese banking industry is in a great position to capitalise on its financial position.
Based on our benchmark of 80 global banks, Chinese banks averaged 20 per cent return on equity, while those in the Americas averaged 13 per cent, those across the rest of the Asia-Pacific region averaged 12 per cent, and those in Europe, the Middle East and Africa averaged 11 per cent during the first quarter of this year. By the end of last year, the non-performing loan rate in China was only 1.14 per cent and capital ratios averaged a healthy 12.2 per cent - the envy of many European and American banks.
On the retail front, high savings rates in China and strong economic growth have created demand for new savings and payments products. Chinese banks continue to increase the sophistication and adaptability of technology - both to analyse customer data and provide the mobile banking services that today's consumers expect.
Smart alliances with foreign banks are another sign of progress and expansion - and not only on the retail side of the business. Links with foreign lenders and collaborative exchange programmes have also helped the Chinese banks improve their risk management, finance and human resource functions and to offer ever more sophisticated products to business customers.
Meanwhile, the global expansion of Chinese companies has provided a ready opportunity for Chinese banks to grow around the world. In 2010 alone, the top five Chinese commercial banks opened 89 overseas branches, in Europe, the Americas, Africa and Oceania.