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Thursday, October 20, 2011

Chinese banks leave footprint in Europe





Several times a year, a group of Chinese banking managers fly to Frankfurt to study at Goethe University’s business school.

The intensive training course is packed with lessons ranging from Europe’s economic situation to its banking systems and regulations. The program at the university’s China Executive Education Center even includes time with officials at Germany’s central bank, the European Central Bank and the Frankfurt Stock Exchange.
“China is opening up to the world,” said Reinhard Schmidt, a professor with the program whose students include managers from China Development Bank. “Having the experience of how things are done in Europe is a valuable lesson for them because they want to imitate quite a lot of this.”

Hitting the classroom isn’t the only way Chinese banks, among the world’s largest, are getting a European education. They have opened subsidiaries across the continent, bought minority stakes in financial companies, and were even reportedly looking at takeover targets in Germany.

The banks’ interest in Europe reflects a growing trend in which Chinese companies are, in the words of one think tank, “buying up Europe.” Chinese interests have snapped up assets such as Swedish car maker Volvo and German electronics retailer Medion AG. Europe’s economic crisis has given China a unique opportunity to move on well-known brands and cutting-edge technologies at bargain prices, as it aims to diversify beyond U.S. assets.

“A kind of ‘scramble for Europe’ is now taking place,” the European Council on Foreign Relations wrote in a report last summer.

Chinese banks are expanding in Europe to provide financing to increasingly international Chinese companies, as well as to boost their own knowledge of the banking sector. They have become shareholders in European financial companies such as Munich Re. But experts believe they won’t snap up a major European bank even as share prices for France’s Société Générale, Switzerland’s UBS and Germany’s Deutsche Bank are plunging amid the debt crisis.

“[Chinese banks] are shopping, looking and sniffing” in countries such as Italy, said François Godement, a senior policy fellow at the European Council on Foreign Relations. But he doubts they will take over a prominent bank.

Part of their hesitation may involve past mistakes: Chinese banks went on a shopping spree a few years ago, buying stakes in Western financial rivals such as Fortis and Morgan Stanley only to see those investments plunge during the 2008 financial crisis in the United States.

As European leaders prepare to recapitalize the continent’s banks, takeover targets that look cheap now could result in nasty surprises down the road, analysts say. “There will be a lot of cheap banks – cheap only on first sight,” said Konrad Becker, a banking sector analyst at Merck Finck & Co. in Germany.

There is also the question of whether Europeans would welcome the Chinese as suitors for their struggling banks; nationalistic sentiments could put pressure on politicians to avoid such deals. “National sentiments are very strong,” Mr. Becker noted. “Given the current situation, if a Chinese bank, a more or less state-owned bank, would buy a significant [European] bank ... this could be a problem.”
The Globe

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