Despite the political unrest in the region, Industrial and Commercial Bank of China (ICBC) has more than doubled its profits from the Middle East within the last year as more companies settled business deals using accounts in yuan.
The Chinese currency has been offered as a means to settle transactions by the bank since March, according to a statement.
ICBC announced plans in August to expand its Middle East operations as it seeks to boost trade in key countries.
The state-owned bank, which already has branches in Abu Dhabi and Doha, as well as a subsidiary in Dubai, will continue to optimize its network in the region, keeping commercial banking as its main business while developing its investment banking and asset management services.
The bank plans to develop a retail banking business in the UAE, subject to regulatory approval, and also intends to expand further in the Middle East prioritizing the growth of its business in Qatar and expansion into Saudi Arabia and Kuwait.
ICBC became the first wholly-owned subsidiary Chinese bank to establish a presence in the Middle East in the fall of 2008.
Tian Zhiping, the bank’s chief executive Middle East, said in the statement that ICBC had maintained significant growth across all business areas and will pursue further growth across the region by increasing the scale of the existing business, broadening the range of the bank’s products and services as well as expanding into new markets across the Middle East.
These expansion efforts would put ICBC in direct competition with Standard Chartered and HSBC, which already offered yuan-denominated business banking accounts to local companies in anticipation of increased trade as China seeks to internationalize its currency to compete with the euro and the US dollar.
Banks in the UAE offering services catering to the yuan stand to benefit due to the number Chinese expatriates and growing trade finances between the two countries.
The population of Chinese expatriates in the UAE currently numbers 200,000, according to the Chinese Embassy in Abu Dhabi.
Since the 1950s, there has been trade between China and the UAE, and in recent years, bilateral trade has witnessed sustained and rapid growth. Continuous development of economic and trade exchanges between China and the UAE, as well as growing demand for investment, has created more demands for financial cooperation between both countries.
In fact, the Middle East’s top export country partner is the US followed by China and the UAE itself ranks in the top 10 for goods exported from China, according to the latest figures from Euromonitor International.
This move by ICBC could represent the start of big expansions by Chinese financial institutions to other markets like the UAE and pose serious challenges to big domestic banks.
It will likely help to aid in the growth of Chinese investments outside of China.
In addition, this will also help to forge close trade ties between China and the Middle East at a pivotal time as China looks to overtake the US as the region’s major trade partner.
