Stepping out of the shadows

Stable, supportive financial environment draws foreign financial service firms to Chengdu

As a pioneer in financial innovation, Chengdu has in many ways been the springboard for the growth of the modern financial services industry in China.

But some industry experts point out that the city has played an important role in shaping the modern financial services industry by being the birthplace of the first paper currency in the world, the jiao zi which was introduced in 1023 during the reign of the Song Dynasty (960-1279).

Much water has flown under the bridge since then and the city otherwise known as the birthplace of pandas today ranks prominently alongside peers such as Beijing and Shanghai in attracting foreign investment.

The State Council ranks Chengdu as the "financial center of Southwest China". That sobriquet comes from the 58 banking institutions, 69 insurance agencies and 44 securities firms based in Chengdu. It is also the premier destination in central and western China for foreign-funded banks, insurance companies and listed companies, and leads all other cities in western China in terms of financial transactions.

According to the financial office of Chengdu government, though some international banks had set up liaison offices in Chengdu in the late 1990s, most of the financial institutions, especially international insurance companies, have opened branches in Chengdu during the past five years.

"More and more multinational corporations are opening their branches in Chengdu, and the number of foreign financial institutions in the city is also increasing," says Ren Ruihong, chief for banking and insurance at the financial work office of the local government.

Though most of the international financial organizations initially came to Chengdu for client-based requirements, many of them are now drawn by the robust and fully operational international financial transaction services system in the city. A total of 13 international banks and 14 international insurances companies have officially set up branches in Chengdu, while many other are waiting for approval from the China Banking Regulatory Commission to set up branches, Ren says.

"We hope that the central government will speed up its approval process, so that we can attract more foreign financial institutions," he says.

The global networking system adopted by most of the international banks helps them to provide commercial loans to multinational corporations through their branches in Chengdu, thereby saving valuable time.

Xie Ling, the designate branch manager of HSBC Bank (China) Co Ltd, says that if a London-based Fortune 500 Global company wants to establish a subsidiary in Chengdu, the parent company can make a pledge towards HSBC's UK office, and get sufficient credit from HSBC's Chengdu branch. "It happens a lot in Chengdu now, and we actually invite many of our global clients to invest in Chengdu through the network," she says.

Xie was transferred to Chengdu three weeks ago from Xiamen, a major city in Fujian province, but she is still amazed by the city. "It is not just me, but every other coworker from HSBC who has been to Chengdu. Many of them frequently flying in and out of the city are amazed by the highly developed and the very international city in the middle of China," Xie says.

HSBC was one of the first foreign banks to set up operations in Chengdu with a branch office in 1996 in the ground floor of the Plaza Central, one of the earliest business complexes in downtown Chengdu.

One of the big programs that Xie will lead early next year in the branch is to shift offices from downtown to the Tianfu Software Park in the southern part of the city.

"Our business is expanding rapidly in Chengdu and we need more space to run our operations," Xie says.

HSBC was also the first international bank to get regulatory approval for setting up rural banks in China, and considers Chengdu to be an important pivot for achieving these goals in western China.

"From the region, we will be able to cover vast tracts of the rural market in China. We believe that the rural market in China has tremendous growth potential. HSBC will continue increasing its investments and services in the western regions to cash in on the huge growth opportunities," she says.

Like HSBC, many other international banks in Chengdu are also moving out of the shadow of their global clients and looking to grow their localized services. Citibank's Chengdu branch has established a commercial division targeting small and medium-sized enterprises in Chengdu.

"Besides top-tier local companies and foreign invested enterprises in Chengdu, we also provide a full suite of products and services to SMEs, including cash management, trade finance and services, treasury products and corporate finance," says Rang Youmin, the branch manager in Chengdu for Citibank (China) Co Ltd.

Much of the confidence of international financial institutions comes from the strong impetus provided by the local government to create a stable financial environment in the city.

"Most of the employees in Chengdu's foreign banks are local hires," says Ren from the Chengdu government financial office.

"Graduates from universities such as Southwestern University of Finance and Economics, as well as the University of Electronic Science and Technology of China, provide a good base for financial industry talent and the related financial outsourcing services in Chengdu."