Saturday, July 7, 2012

Chinese in Pakistan banking

EDITORIAL:FRONTIER POST
The Bank of China (BOC), the second Chinese bank after the Industrial and Commercial Bank of China Ltd (ICBC) is making its entry in Pakistan. Entrance of Asian banking giants following exodus of western banks suggest changing dynamics of banking industry in Pakistan. ICBC, the world's biggest bank by capitalization, has already started operations with one branch each in Karachi and Islamabad. The BOC, in which the Chinese Sovereign Wealth Fund holds a substantial stake, is focusing on corporate and personal banking and also on investment banking. The expanding bilateral trade between Pakistan and China has attracted Chinese financial market giants to mark their presence in Pakistan. The BOC recently entered Kenya and has operations in other countries, including South Africa and Zambia. The recent HSBC decision to wind up its operation in Pakistan is undergoing restructuring after continued global financial crisis and failure of banks in United States and now in Europe. The Royal Bank of Scotland was also the victim of financial crisis in Europe. Pakistani bankers said the entrance of Chinese banks could change the banking trend which largely depends upon government papers for profitability. The African experience shows that the two Chinese banks have enormous skills and energy to explore and grab the potential available in Pakistan, a market of 180 million population. The leadership of the two countries has been emphasising to increase the volume of bilateral trade which has increased in the last three years, mostly in favour of China. Pakistan has also signed a currency swap agreement (of $1 billion) with China to improve bilateral trade and investment. The decision of two Chinese banks to start working in Pakistan may also be a broad indication of Islamabad's keenness of promoting cooperation with the Shanghai Cooperation Organisation that will give Pakistan a huge economic opportunity, particularly reaching the markets of Central Asian Republics, Russia and, of course in the first instance, China. Banking anal ysts said the weakening of European banks and Arab economies have also opened space for the Chinese banks to tap the potential. Simultaneously, the initiative of a Turkish bank, Isbank, to enter into Pakistan is also a positive sign for the growth of financial sector. India is also making effort to open banks in Pakistan to increase its trade with Pakistan and Afghanistan. The entry of Chinese banks in Pakistan will no doubt give a boost to the already all weather friendship between the two neighbouring states, but augurs well for the country's sluggish economy that has, under the operational influence of western banks, failed to pick up pace and stands relegated to one of the lowest even in South Asian perspective. The step is a healthy departure from an unhealthy past and strongly indicates that Islamabad has seriously been pursuing the goal of looking eastwards.

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