KARACHI: The State Bank of Pakistan (SBP) said on Saturday it had granted state-run Bank of China a licence to operate in the country to meet the financing needs of China Pakistan Economic Corridor (CPEC) projects.
“State Bank of Pakistan has issued a banking licence to the Bank of China. The bank will commence its business in branch mode after meeting other regulatory requirement,” SBP said in a statement.
“The Bank of China aims to provide differential and specialised banking services to effectively serve the financing needs of China Pakistan Economic Corridor (CPEC) related projects by leveraging on its experience and global technology platform.”
China has pledged to invest over $57 billion in Pakistan´s rail, road and energy infrastructure under the CPEC.
Meanwhile a government statement said the finance minister Ishaq Dar conveyed the SBP’s approval to Mr. Tian Gouli, chairman of the Bank of China at its headquarters.
Gouli in his last visit to Pakistan had expressed the desire for launching banking operations in Pakistan and sought SBP’s permission.
“Dar welcomed the decision by Bank of China to commence their banking operations in Pakistan and also extended invitation to Mr. Tian Gouli to visit Pakistan and himself inaugurate the first branch of the Bank of China in Karachi,” the statement said.
The Bank of China is the second Chinese bank entering in Pakistan. The central bank issued licence to Industrial and Commercial Bank of China to start business operations in 2010.
The SBP said the Bank of China will initially bring $50 million to fulfill the Minimum Capital Requirements (MCR) of the central bank.
“The long term objective of the Bank of China is to increase its market penetration by opening branches in major cities of Pakistan aiming to be one of the largest foreign banks in Pakistan,” it added.
The Bank of China is a subsidiary of China Central Huijin, an investment arm of the Government of China. The Bank is not only operating in the Chinese main land, but its footprints have reached to 50 countries. Nineteen of those countries are located across Chinese “One Belt One Road” initiative. At the end of 2015, the Bank had a total of 11,633 institutions including 644 in overseas markets.
The Bank of China is the 4th and 5th largest global bank in terms of Tier-1 Capital and total Assets respectively. It is listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange.
The central bank said the Bank of China’s entry into Pakistan represents growing confidence of international investors on the country’s banking sector and stable economic outlook.
The international creditor including the International Monetary Fund said recent reforms, including cutting costly subsidies, privatising some loss-making state companies and building up foreign reserves, had strengthened Pakistan’s economy and set it on a path to higher growth.
It forecasting 5 percent economic growth for the year to June 2017 but says this could improve to 6 percent in the medium term with CPEC-related investments. The central bank move comes when the Prime Minister Nawaz Sharif is on a visit to China to attend the Belt and Road Forum that is focused on boosting regional development through China’s new Silk Road plan.
The Prime Minister reaffirmed Pakistan’s commitment for the completion of early harvest projects under CPEC with his Chinese counterpart.
Many analysts see new banking licenses to the Chinese financial institution is expected to strengthen syndicated corporate and project financing, and foreign exchange transactional cooperation among Chinese and financial institutions.
They said Chinese banks presence in Pakistani market would also accelerate the implementation of CPEC projects as financing requirements for such projects are in foreign currency which is not easy for the local banks. “The central bank has been eager to have foreign banks including Chinese branches in Pakistan as it seeks to expand the presence of foreign players in the financial market of the country,” said a senior banker. “It will bring investment, technology and expertise into the country.”
Publish : The News Sun May 14, 2017