Chinese cash, common law: PRC bank lending goes global

The biggest Chinese banks have ambitious global lending plans. This is creating borrowing opportunities for Chinese and international companies, and a windfall for major law firms. George W Russell and Robin Weir report

In recent times, the major Chinese banks have undertaken a string of record-breaking initial public offerings. Agricultural Bank of China’s listing in 2010 raised US$22 billion, and Minsheng Bank raised US$3.9 billion in 2009. Since its US$21.9 billion IPO in 2006, the Industrial & Commercial Bank of China (ICBC) has been the world’s largest bank by market value.

The banks have also begun to make strategic acquisitions abroad. In January, ICBC paid US$140 million for 80% of the small US retail network of the Hong Kong-based Bank of East Asia. In 2007, ICBC forked out US$5.6 billion for 20% of South Africa’s Standard Bank, while China Merchants Bank acquired control of Hong Kong’s Wing Lung Bank for US$2.5 billion in 2008 (see Proceeding with caution on page 33).

But while major deals such as these have hit the headlines, Chinese banks are moving forward quietly in another area – international lending – that could alter the global financial landscape. “Chinese banks are happy to deploy their resources internationally, especially loans,” says Alexander Aitken, a Herbert Smith partner in Hong Kong who has advised China Development Bank, ICBC and others.