Recently there seems to have been an increased focus on the presence of foreign banks in China and their domestic China businesses. There was an article in the WSJ last week that mentioned the number 86% which represents the increase in foreign banks' lending in China in 2010. A webinar from Celent talks about how JVs/partnerships are still the way to go in China for foreign banks.

Yesterday was the 7^th Annual BFTF which was held at the Traders Hotel here in Singapore. The event featured around 20 international speakers, 8 sponsor/vendors and was attended by about 100 delegates. The event, although smaller than in previous years – and smaller than similar events, was excellent. I was expecting the conversations to be thought-provoking, but was genuinely impressed by some of the debates and discussions.

As the world economy recovers from the deep hole of the financial crisis, institutions in Chinese financial markets, like their counterparts in the west, are looking for ways to improve their efficiency through technology. This drive for efficiency is bringing Cloud computing into the spot-light and the idea that computing will increasingly be delivered as a service, over the internet, from the vast warehouses of shared machines – a new way to meet the demand for efficiency improvement.

In recent years, China’s banking sector has gone through rapid changes, driven by deepening financial reforms, growing presence of foreign banks and quickly evolving customer demand. With intensified competition, there is a new wave of investment in core banking systems among Chinese banks, in a hope to sharpen their technology edge and stay ahead of the competition.

A look at the current payment card market in China in the face of the current global economic crisis

Prior to joining the WTO, the knowledge and experience of bank staff in Chinese banks was not an issue. Most domestic banks were very inwardly focused on their core domestic business and staff had the capabilities to match. However, as more and more SOEs were either listed or entered into partnerships with foreign multi-nationals, the requirements of domestic companies changed and expanded. No longer was it a case of simply domestic business - China had gone global. The issue then became staff experience and capabilities and as most Chinese banks didn't have the experience in-house, so they looked west.

Beyond satisfying WTO requirements, one of the key rationales for allowing foreign multinational banks to buy into Chinese financial institutions was to leverage the investors’ experience to develop a more mature set of regulations and financial industry as a whole. With the slowdown going truly global, we are starting to see multi-national banks start to pull out of China; RBS and UBS have sold off stakes in their Chinese investments, it’s likely that many other banks will do the same in the coming months. This poses a big challenge for Chinese banks.

Non-performing loans (NPLs) have been the monkey on the back of Chinese banks for years. Previous to 2001, NPL rates weren’t as big of a concern for the banks as they were all fully state-owned and competition was weak. China entering the WTO changed that. As the industry started to open up, competition increased and banks considered public listings. Cleaning up their low-quality balance sheets was one of the first steps on the road to IPO.

Although a much younger company than most banks, Google offers a great example of how to keep innovation flowing.

According to a recent statistic published by China Union Pay, Chinese banks have issued more than 1.3 billion debit, credit and ‘quasi’-credit cards through the end of September. This means that, on average, every man, woman and child in China now carries a piece of plastic. Quite a staggering number and, at first glance, quite promising.