Interview by Horasis with David K. P. Li, Chairman, Bank of East Asia, Hong Kong SAR
What sets the China market apart from the banking markets in other countries?

The most notable difference between the banking market in China and that in other countries is the rapid pace of change in China . Five short years ago, many outside observers worried about the health of the local banking sector. Now, balance sheets are strong, and Mainland banks are among the largest banks by market capitalisation in the world. The local banking sector is becoming ever more sophisticated, and the opportunities are growing day by day.

When China joined the World Trade Organisation in the year 2001, it made a commitment to fully open the banking sector to foreign competition by the beginning of the year 2007. China has made good on its promise, and four foreign banks – including The Bank of East Asia – have recently been given the green light to establish local subsidiaries, giving us the right to conduct the full range of banking business with local residents for the first time since we re-entered the Mainland market over 25 years ago.

Banking in China is highly competitive, and the growing role of foreign banks is driving standards higher still. This, in turn, is encouraging greater efficiency in the management of savings and the allocation of credit, to the benefit of the entire economy.

How would you characterise the way international business is adapting to the emergence of China?

Many companies have been very successful in integrating China into their overall strategies. Some have taken advantage of China 's excellent infrastructure and efficient manufacturing capability to improve both the quality and the cost structure of their production. Others have provided products and services needed by local businesses and consumers, and gained a strong position in the domestic Chinese market.

However, still others have not adapted well to the growing economic strength of China . As access to education improves, and as China further develops its domestic economy, Chinese companies will only become more formidable competitors to those who are unwilling or unable to adapt.

Could you tell us what tomorrow’s Chinese global companies will look like?

China already has a number of very powerful companies in a wide range of fields, from resources, to insurance, to banking. Furthermore, strong demand for Chinese stocks is driving the market capitalisation of these firms every higher. Many are already in a strong position financially to launch take-over bids for major established companies overseas. Chinese companies may very well be more active in merger and acquisition activity in future, provided a good strategic case can be made for an individual target.

However, Chinese companies that wish to become global players will face a backlash if they remain state-controlled. We are therefore likely to see the emergence of more companies that have no state ties. There are many companies in the internet sector, in bio-technology and in other up-and-coming areas that are candidates to grow to be major global players. Some are already listed on domestic and international exchanges; others are currently being nurtured by private equity capital. It won't take long before they are noticed.