Encouraged by burgeoning volumes and values of letters of credit (L/Cs) for Australian exports to China, ANZ Bank says it plans to invest in two Chinese banks in the next 12 months.

Despite this recent growth in trade financing business, ANZ sees China's retail banking sector as the area where it can seize the biggest opportunities.

Trade finance

The bank already considers itself the "dominant financier of exports from Australia to China," according to ANZ Asia Pacific group managing director Elmer Funke Kupper.

The bank's L/C business has grown substantially in recent months. "In the last six months it's grown by about US$500 million," according to Funke Kupper. "Most of that is in resources, and we're seeing two things happen - one is volumes are going up, secondly, prices are going up," he explained.

Overtaking

In the future, however, according to Funke Kupper, retail banking "will become bigger than our traditional trade financing."

He says ANZ is looking at forging partnerships leading to investments in Chinese banks so that the Australian bank can take a slice of China's lucrative retail banking sector.

Bank targets

Funke Kupper says his bank is targeting two banks. ANZ already has an alliance with Shanghai Rural Credit Co-operatives Union (SRCCU) in which it plans to take a stake, possibly of around 20 per cent once SRCCU becomes a fully fledged bank.

"We are hopeful that sometime in 2006 we will become an investor in the bank," Funke Kupper said. ANZ expects to make an investment of similar size in one more bank in another major coastal city he added.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.