Dhe Deutsche Bank is starting a new attempt to continue growing in the promising market of China. According to the FAZ, it intends to sell the funds and services of its subsidiary DWS more in the huge private customer market through a joint venture with the asset management company of Postal Savings Bank. The talks are still at an early stage, and whether and when the joint venture will actually come about is still open. Neither the bank nor the DWS wanted to comment on the information.
The Postal Savings Bank is the fifth largest Chinese bank and according to its own information has 600 million customers. The preferred partner of the Deutsche Bank is not the very first address in the financial system of the People’s Republic. The 40,000 branches of the Postal Bank, which are painted green, are mainly to be found in the lesser-known Chinese megacities and in the provinces. After all, according to its self-description, the institute, which is listed on the Shanghai and Hong Kong stock exchanges, primarily wants to serve “agriculture and farmers” as well as small and medium-sized enterprises. Postal Savings Bank’s wealth management division was only founded two years ago. Two thirds of the 183 investment products that the bank offers earn interest at a fixed rate.
DWS has been looking to grow in Asia for some time
For Deutsche Bank, the joint venture would offer a fairly low-risk opportunity to expand its business in China. The granting of loans or even house financing are apparently not planned. The self-listed subsidiary DWS has been looking for ways to expand its sales network in Asia for a long time. CEO Asoka Wöhrmann has often promised his shareholders “inorganic growth”, i.e. acquisitions.
If the joint venture comes into being, the Frankfurt-based company could sell its financial products in one fell swoop through the Chinese partner’s huge branch network and target the growing middle class without setting up additional branches of their own. So far, the largest German bank in China has mainly been active in investment banking, for example advising on mergers and acquisitions and issuing bonds, serving high-net-worth customers and helping companies with trade finance. Shortly before Christmas, the institute was also the first bank from the European Union to receive a license to hold Chinese securities.
Everyone wants the rich Chinese
Deutsche Bank had to call off the last big attempt at the Chinese mass market in 2015, mainly because of money worries. The laboriously built participation in the Hua-Xia–At that time, the Frankfurt bank had to sell the bank again in search of urgently needed capital.
Again, success is not guaranteed. The market is and will remain fiercely competitive. Since China opened the door to its huge financial market for foreign providers three years ago, it is not only Deutsche Bank that has sensed the big business with the wealth of the rich in China, the number of which is growing rapidly. Today there are already around 5 million people in the country with an available income equivalent to at least one million dollars. Credit Suisse estimates that there will be twice as many by 2035.
The Americans were earlier
In order to get the money from the winners of the Chinese economic miracle, the four major Chinese banks are the preferred partners of foreigners. Goldman Sachs has teamed up with ICBC, the world’s largest bank in terms of total assets, for its investment advisory services in China. Blackrock works with the China Construction Bank. The French asset manager Amundi has set up a joint venture with the Bank of China. Competitor Schroders from London cooperates with the Bank of Communications. Foreigners hold a majority in all of the joint ventures. Despite their resounding names and the many rich people in China, they are still not guaranteed to achieve resounding success.
As early as 2017, when the Chinese government promised to cut the restrictions on foreign banks and funds in the People’s Republic for the first time, German financial managers in Shanghai criticized that the step was easy for the government in Beijing – after all, the “cake was already distributed” in China’s financial market. In fact, the financial magazine “Caixin”, which first reported Deutsche Bank’s entry into China’s wealth management market, recently anonymously quoted dozens of financial managers from foreign providers who are anything but happy about the alleged opening of the financial sector. The competition, but above all the often unpredictable state regulation in China, is much tougher than at home.
Beijing should not stop at letting foreign investors into the country, said one of those affected. If obstacles were put in the way of their expansion, the foreign banks could leave China again in a few years after they had sunk a lot of money in the Middle Kingdom. Every single financial product has to be approved by the state in a lengthy manner beforehand – throwing “innovations” onto the market is difficult or even impossible at this snail’s pace. The fact that the Chinese competition has a network of contacts that are vital in China, which has grown over decades, does not speak for the foreigners’ chances of success.
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