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Chinese entry into e-commerce and banking industry of Pakistan

After investment in energy and transport sector under China-Pakistan Economic Corridor (CPEC), China is now making headways in the e-commerce and banking industry of Pakistan through Alibaba, Bank of China and Industrial Commercial Bank of China (ICBC). Realizing the potential of CPEC, Pakistani banks are also opening their branches and representative offices in China. This article aims to analyze the impact of Chinese foothold in the aforementioned sectors of Pakistan.

E-commerce market

With foundations well in place for digital commerce to flourish in Pakistan, it is only a matter of time before e-commerce takes the Pakistani consumer market by storm. The e-commerce market in Pakistan has changed drastically. Large e-commerce portals, such as PakWheels.com, Zameen.com and Rozee.pk have changed the landscape of the e-commerce industry. This change may be rightly attributed to the emergence of 3G and 4G, which constitute 90% of Pakistan’s broadband base. Considering this, e-commerce giant Alibaba, one of the world’s largest online retailers, with a total market value of $380 billion, has signed an MoU with our Ministry of Commerce which aims at promoting exports from SMEs and may potentially lead to an investment of approximately $400 million in Pakistan’s e-commerce sector. Furthermore, this agreement entails the provision of training for SMEs with respect to using e-commerce platforms, along with promoting mobile financial services and online payment services. With the entry of Alibaba, other tech giants will follow, with the result that SME exports will be encouraged, an issue which was previously not addressed.

The promotion of the Small and Medium size Enterprises (SME) sector will have a trickledown effect that will spearhead the development of local manufacturing. In addition to this, an investment of $400 million will prove to be beneficial to the e-commerce sector. Foreign competition will lead to better standards in this sector and force local e-commerce companies such as Daraz.pk and Homeshopping.pk to become more efficient or risk being wiped out. Consequently, not only more jobs will be generated, but HR and relevant skill-sets will also be developed. Alibaba’s partnerships with local vendors could also boost the economy.

On the flip side, the entry of Alibaba poses major threats to the e-commerce industry. Firstly, there is the possibility of the monopolization of the e-commerce industry, as local players will not have the means to compete with Alibaba’s resources and as a result, some of these ventures may die out. Furthermore, the presence of the Alibaba platform could potentially increase the dumping of Chinese goods in the market. As a result, local manufacturers will be unable to match the low prices Chinese manufacturers offer.

Banking industry

Founded in 1984, the bank provides comprehensive financial products and services to 4.12 million corporate banking customers and 259 million personal banking customers by virtue of the distribution network consisting of 16,227 domestic institutions, 203 overseas institutions and over 1,562 correspondent banks worldwide, as well as through its E-banking network comprising a range of internet and telephone banking services and self-service banking centers, basically forming an internationalized trans-market operating structure focusing on commercial banking business and maintaining a leading position in the domestic market in commercial banking areas. For the fourth consecutive year in 2016, the Bank ranked 1st place in the three authoritative lists of The Banker’s Top 1000 World Banks, the Forbes Global 2000 and the Fortune Global 500 Sub-list of Commercial Banks.


Industrial and Commercial Bank of China Karachi Branch was established on 20th May 2011, and passed the examination from State Bank of Pakistan on 18th August 2011. Presently, they are offering Local Deposit/Foreign Currency Deposit, Foreign Exchange, Remittances, Financing and Trade Finance services etc.

As China’s most internationalized and diversified bank, Bank of China provides a comprehensive range of financial services to customers across the Chinese mainland as well as 51 countries and regions. The Bank’s core business is commercial banking, including corporate banking, personal banking and financial markets services. BOC International Holdings Limited, a wholly owned subsidiary, is the Bank’s investment banking arm. Bank of China Group Insurance Company Limited and Bank of China Insurance Company Limited, both wholly owned subsidiaries, run the Bank’s insurance business. Bank of China Group Investment Limited, a wholly owned subsidiary, undertakes the Bank’s direct investment and investment management business. Bank of China Investment Management Co Ltd, a controlled subsidiary, operates the Bank’s fund management business. BOC Aviation Limited, a controlled subsidiary, oversees the Bank’s aircraft leasing business.

Industrial and Commercial Bank of China Limited (ICBC) Pakistan has been allowed to establish a local yuan settlement and clearing setup in Pakistan enabling it to open yuan accounts of the Chinese banks operating in Pakistan and to facilitate settlement of yuan-based transactions such as remittance to/from China. With the opening of Bank of China in Pakistan, the access to Chinese markets will strengthen further. Considering the recent local and global economic developments, particularly with the growing size of trade and investment with China under CPEC, yuan denominated trade with China will increase significantly and will yield long term benefits for both the countries.

The main issue is that the Chinese banking system is used to handling transactions in yuan and other regional currencies (of the countries with which direct settlement of transactions are going on) but Pakistani banks are not. The challenge is to make them used to such transactions, explain them how the rupee-yuan settlement of transactions would work and how the businesses would benefit from it. The next step is promoting the clearance and settlement of claims of financial institutions through a cross-border interbank payment system. Once concrete developments are made in this regard, the free flow of capital and cross-border transfer of legitimate funds between the two countries would become easier.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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