Aug 9 - 15, 2010

Industrial and Commercial Bank of China (ICBC), the Chinese banking giant plans to open its branches in Pakistan and acquire equities in Pakistani banks to pave the way for increased trade and investment ties between the two countries.

President Asif Ali Zardari reportedly welcomed ICBC for playing major role in promoting investments and joint ventures in Pakistan involving Chinese corporations and various companies during his meeting with Executive Vice President and Executive Director of the Board of ICBC Wang Lili in Islamabad last week, which was the follow-up of President's earlier meeting with the President ICBC in Beijing last month. Presently many Chinese companies are interested in making investments and establishing joint ventures with local companies in Pakistan.

Haier, the China's largest home appliance-maker has already entered the country with an initial investment of about $35 million to create a joint venture, called Haier Pakistan, with Ruba General Trading Company. Similarly, Zhongshan Changhong Electric Co Ltd, the second largest state-owned electronics manufacturer of China, is presently in talks with the Pakistani authorities for setting up an assembling plant in the country. Analysts believe that ICBC presence in Pakistan will provide financial support to Chinese companies investing in the South Asian country and other development partners engaged in infrastructure development and financial business.

Pakistan has become one of the major destinations for Chinese investors and the existing investment and trade equations between the two countries can further be enhanced if important Chinese banks like ICBC would start operations in Pakistan, Associated Press of Pakistan (APP) reported, citing President Zardari. Zardari reportedly said that various areas including oil and gas exploration, ship building and industrial sector provided excellent opportunities for the Chinese Banks to consider investment and also to set up branches in Pakistan to avail the opportunities in the country's growing economy.

The visiting Wang Lili appreciated the government's interest to welcome and actively engage ICBC for further deepening the cooperation and business relations. She expressed satisfaction over the volume of bilateral trade between the two countries, which had crossed $4 billion mark and was likely to touch $10 billion by the end of this calendar year.

The visiting Chinese delegation that met with the president Zardari last week also included Liu Jian, Chinese Ambassador Zhang Qinghua, Deputy Head of HR, ICBC, Mrs. Chen Jin, Deputy Head of International Business ICBC, Cao Yunchuan Deputy General Manager of ICBC Seoul branch and Su Hui, Project Manager Overseas Management & Strategy Planning, International Department.

During the President Zardari's fifth visit to China earlier last month, Yang Kaisheng, President of ICBC called on Zardari in Beijing on July 7 and expressed his keen interest in exploring investment opportunities in the South Asian country. Pakistan and China signed six accords to increase economic cooperation in different sectors during the five-day official visit of President Zardari to China, which concluded on July11.

The visiting ICBC's Lili also called on Prime Minister Yousuf Raza Gilani in Islamabad last week and assured Gilani of her bank's proactive efforts to expedite the process for opening its branches and operations in the country.

ICBC is the largest state-owned bank in Asia and fourth-largest in the world offering a wide range of financial products including personal and corporate banking services, global services, e-banking, bank card and more. It is a leading financial player in China with a large customer base and multi-dimensional business structure. Over the past few years, ICBC is building its own team of international staff while growing its overseas presence. Presently, ICBC has 175 overseas branches and subsidiaries in 22 countries/regions with an overseas workforce of nearly 3600. Out of them, over 90 per cent are foreign staffs.

In a recent meeting with Prime Minister Gilani, ICBC's Lili revealed that ICBC was considering equity participation in Pakistan's finance and banking sectors. Gilani expressed hope that ICBC would soon open its branches in Pakistan, as cooperation in finance and banking sectors needs to be focused upon in larger interest of long-term strong economic relations between the two countries. Madam Lili Wang commended the government for making progress in the economic sector despite enormous challenges that it is faced with and noted that Pakistan had registered GDP growth of more than four percent in the first six months of 2010.

Pakistan is presently beset by grave challenges on political, security and economic fronts. The country's economy witnessed a growth of 4.1 percent in the last fiscal year 2009-10, compared to 1.2 percent growth it witnessed in the previous fiscal year 2008-09.

A challenging economic and business environment continues to affect the growth of banking industry in Pakistan. Deteriorating asset quality and high interest rates are likely to continue to hold back credit growth over the coming months.

The surge in Non Performing Loans (NPLs) pose a challenge for the country's banking industry. The NPLs of the banking industry witnessed a rapid increase for the last one and a half years or so and almost doubled since calendar year 2007. Commercial banks' lending to private sector during the Oct-Dec quarter of last fiscal year 2009-10 increased by 4.16 per cent. Commercial banks seem reluctant to extend credit to the private sector.

In November 2006, Pakistan signed a Free Trade Agreement (FTA) with China in goods, investment, and services. With liberal incentives offered by the government, low cost labor and access to the huge markets of countries in the region, Pakistan offers unique opportunity to Chinese investors to invest in the strategically located country. China's investment in the country has expanded from resources, home appliances to communications and finance.

Zhongshan Changhong Electric plans to invest one billion rupees to set up an assembling plant in Pakistan's Sindh province, The News reported. The company is presently in talks with Sindh government, which will provide it land for the plant in Export Promotion Zone in Bin Qasim, near southern port city of Karachi. The company plans to manufacturer 10,000-15,000 units of split air conditioners, 3,000-4,000 units of refrigerators and 2-2.5 million units of televisions in first year of its commissioning.

Established in 1958, Zhongshan Changhong has established overseas branches and representative offices in USA, Europe, Australia, Russia, Southeast Asia and Middle East and is continuing setting up branches and offices in other markets. It has more than 20,000 Sales and Service outlets available worldwide with over 30,000 employees.

The Haier-Ruba zone is the first overseas industrial zone established by China in the country's Punjab province. The project has been considerably delayed on the issue of sharing cost of land, as Haier-Ruba has refused to buy 4218 acres of land from its own pocket. Haier-Ruba has been insisting that land should be provided free of cost, or at subsidised rates. The government has proposed acquisition of about 3,000 acres of land in the name of federal government for development of economic zone for leasing out to Haier Ruba.

In December, Lumena Resources Corporation of China and KASB Group of Pakistan have already signed an MoU to promote China Industrial Zone in the country. The MoU encompasses conducting market survey, analysis, establishing an industrial park wherein Chinese companies will establish their business facilities, and exploring areas of mutual interest for joint ventures in the country.