There are three Chinese banks in the New Zealand market. According to disclosures, the local entities of China Construction Bank (CCB) pull ahead of its Chinese peers in key indicators such as asset volume, asset quality and profitability.
Last week happened to be the fifth anniversary of CCB setting up a local subsidiary bank in New Zealand (CCBNZ) on 15th July 2014. The parent bank's assets exceed $4 trillion and in China it is the largest lender both in the infrastructure and residential mortgage areas.
As local CEO Jun Qi says, the journey is exciting as the bank constantly reaches milestones, especially after the parent bank further obtained a branch license from the Reserve Bank of New Zealand in December 2017, the first bank to do so after the global financial crisis.
"This enables us to operate on a much larger scale, with the ability to leverage the balance sheet of the global parent bank." Qi says – meaning more investment firepower and more ability to support local projects.
The bank's vision in New Zealand is to be 'the first call' Chinese bank, serving trade, capital and people flows in and out of China and New Zealand. It counts as its three pillars such businesses as inbound Chinese investments, local blue-chip companies and infrastructure projects, and high-net-worth customers.
"But apparently we cannot simply rest on the laurels and need to ride on a second growth curve." Qi says. The bank seems well placed to do so in light of its own position and strong support from the parent bank.
The CCB subsidiary bank is well capitalised to grow. Its tier 1 capital adequacy ratio sit at 20.71% in December 2018, more than two times of the required minimal level, and 5.71 percentages above a proposed level of 15% by RBNZ unveiled last December.
Commenting on RBNZ's proposal requiring retail banks to set aside more capital to withstand "a one in 200 year financial crisis", Qi says "it would have marginal impact on our business and we definitely have headroom to grow."
To put it into perspective, Qi points out that China now is New Zealand's largest trading partner with bilateral trade volume over $30 billion last year. Accordingly Chinese banks can and should contribute more to the local economy, especially "in areas such as institutional, agriculture and infrastructure where we see opportunities opening up." Qi adds.
"Also the branch license allows us to separately grow local assets as large as the subsidiary", Qi says, "that provides us further capacity." According to Qi, the parent bank shows unwavering support. The additional capital injection of US$ 100 million (NZ$ 140 million) in 2016 and attainment of branch license in 2017, are all "votes of confidence by the CCB group in the local market and operations", Qi says.
Apart from these very tangible supports, CCB is guiding the local operations with its grand strategies which consist of residential leasing, inclusive finance and financial technologies (fintech), in the aim of projecting a "second growth curve" for a bank with more than 60 year history, some 340,000 employees and footprints in 30 countries around the globe.
Residential leasing
As the largest mortgage lender in China, CCB is acutely aware of the housing issue in mega-cities like Beijing, Shanghai, Guangzhou and Shenzhen, where youngsters are being priced out as their counterparts in Auckland.
CCB's solution is a residential leasing scheme that cultivates quality and long-term tenancy. The bank provides loans to tenants for the long-term lease (typically five years).
Also homeowners can deposit their houses with CCB in return for a one-time payment, so CCB can rent out the property. It is recently reported that properties listed on CCB's online platform have exceeded 10 million.
Inclusive finance
This focuses on marginalised groups previously under-served by the financial industry – including small-to-medium enterprises (SMEs), start-up entrepreneurs, outdoor workers and rural concerns. China's economy is heavily influenced by 73 million SMEs which contribute hugely in terms of revenue, employment, tax, innovation. The bank anticipates another Tencent or Alibaba, two tech giants, springing from those ranks.
CCB has combined fintech and big data for an online offering called "Quick SME Loan" – allowing credit decisions to be reached in one minute after artificial intelligence's swift analysis of an SME's cash flow and payment patterns. Such loans now sit around $ 170 billion benefiting 1.5 million customers and the bad loan rate is kept below 1%.
Fintech
A major investment by CCB, financial technology (fintech) has been changing the face of its 14,000 outlets in China. In April last year, CCB opened one unstaffed branch in Shanghai, run by smiling robots harnessing technologies including facial recognition, artificial intelligence and virtual reality. Basic services are conducted without human intervention. This month CCB has also unveiled three 5G outlets in Beijing.
Working with the government of Yunnan, a southwestern province in China, CCB last year launched a smart app allowing residents to deal with matters, at their fingertips, relating to taxation, medicare, marriage registration, legal proceedings and more. This has greatly increased convenience for the residents and allowed authorities to govern in a smart and brand new way. In less than three months, the app signed up more than 1 million users and dealt with more than 3 million matters.
"We are actively responding to and implementing CCB group's strategies here in New Zealand." Qi says. The bank mulls to introduce locally fintechs such as mobile payment app and "Quick SME loan", which is unsurprising, as 97% of all firms in New Zealand employ less than 20 people.
Another area of focus is deal-making. Qi says the bank has helped arrange a large part of activities of the Infrastructure NZ delegation in Shanghai this April. It is also discussing with some local fund schemes which may want to invest in China and some companies with trade ties to China to issue Renminbi denominated Panda Bonds.
In the housing area, CCBNZ wants to keep building and improving its mortgage offering. At the same time, the bank launches research and analysis into the local residential lease market. "We've found leasing becoming a big issue for New Zealand's major cities such as Auckland and Wellington, and apparently the government is tackling that." Qi says, "As a commercial bank we can also contribute to the solution or at least alleviation of this issue."