Korean banks in China strive to go local way

Major Korean lenders including Woori, Hana and Shinhan have recently stepped up efforts to grab a bigger share in the lucrative Chinese market as Beijing slowly opens its banking sector to foreign institutions.

They are focusing on reaching out to domestic players and building up a bigger retail client base.

Last month, Woori Bank opened its 13th Chinese branch and relocated its key outlet in Beijing into a business hotspot to enhance its private banking service for rich clients.

Korea Exchange Bank also plans to increase the number of branches to about 30 from the current 10. The state-run Industrial Bank of Korea is to apply for permission for retail banking by the end of this year.

Key to their fortunes is localization in terms of partnership, sales, product development and human resources, industry experts said.

“The extent to which banks can localize their operations, in every aspect of their business, is the key to increase their yuan deposits and make their name known,” a China desk strategist at Hana Bank told The Korea Herald.

The Korean bank bought a 50 percent stake of the Qingdao International Bank of China in 2004. The other 50 percent share belonged to the Industrial and Commercial Bank of China, the largest bank in the world by market capitalization.

It also purchased 18.44 percent stake in China's Bank of Jilin in September 2009 as the first and only Korean bank sharing controlling stake with a local player.

“We needed to attract local Chinese customers and the fastest way to do that was to hire local experts and sharing their know-how in everything from communicating with local authorities to product development,” a Hana official said.

“Partnerships with China's Bank of Jilin were great because a majority of ethnic Koreans living in China are based in Jilin, and they would use a Korean bank under partnerships with a Chinese bank for fund transfers,” he added.

Foreign institutions still face strict regulations in China. Foreign entities wishing to become incorporated needed to have operated more than three branches in China with at least 2 billion yuan (US$293 million) of operating assets.

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