PWC: China-funded peer competition is the biggest challenge for foreign banks

In the afternoon of May 7, according to foreign media reports, PwC's latest annual survey of foreign banks shows that competition from Chinese banks has become the most difficult part of foreign bank executives ' operations in China.　　While foreign companies have long argued that the regulatory environment and personnel issues are the hardest part of operating in China, a new emerging factor is now the single biggest obstacle to success in China: competition from Chinese banks. PwC interviewed the chief executive, senior executives and branch managers of 42 foreign banks in China during its fifth annual survey of foreign banks in China.　　On this basis, it lists the most difficult position in China. In the 2010 survey, competition from Chinese banks topped the list for the first time, defeating the "regulatory environment" that has been the top priority for the past two years. The views of foreign managers are not changing overnight.　　Local competition ranked second last year, though for a very different reason. The market share of foreign banks fell in 2009, as key clients of foreign banks--foreign companies in China--dropped loans. Moreover, the global financial crisis has made the global headquarters of foreign banks more conservative, and their lending policies in China are also lacking in enthusiasm.　　This has made the Chinese banks, which have been lending at low interest rates, a huge advantage in attracting foreign banks ' clients at home and abroad. But 2010 years are different. With the slowdown in lending by Chinese banks, the confidence of foreign banks should be closer to the 2007.　　Concerns about local competition were only ranked Nineth in the PWC survey report. The only change is that Chinese banks are improving. The 2010 report said that the wide coverage of Chinese banks and rising service levels gave them a greater advantage in resisting competition from foreign banks in targeted markets.　　The limited range of products that Chinese authorities allow foreign banks to deploy means that they are increasingly struggling to deliver products that are different from their local rivals. The report provides some clues as to the future of foreign banks. More than three-fourths per cent of respondents indicated that they would make acquisitions in China over the next three years. Only about 50% of respondents in 2008 and 2009 had this intention. (potential target areas include asset management, securities, leasing, rural banking, insurance, consumer finance, private equity, agency operations and trust companies.) Another concern may be that more banks will be set up locally in China in the coming years. This change in identity could allow banks to provide a wider range of product categories, which could be a key to the bank's differentiated strategy. At present, only more than 30 foreign banks have been registered locally.　　According to the survey, foreign banking groups expect another 10 to 15 foreign banks to implement the process by 2013. The survey also showed that foreign banks have a market share of around 2% in China, and of course there is room for expansion. But there are signs that Chinese banks are learning banking quickly, and that foreign banks may have to come out of an innovative new path to take a firm foothold in China.