China’s largest bank the Industrial Commercial Bank of China will open a branch office in Mumbai, India later this year. The bank is currently in the process of securing the necessary permits to open the branch office, officials stated in Beijing during the recently held India-China Development Forum. The forum is being organised to celebrate the 60th anniversary of diplomatic relations between the two countries.
ICBC’s entry into India comes just a few weeks after India’s largest lender the State Bank of India was permitted to trade in yuan. Opening a bank in India also brings Beijing closer to its goal of making the yuan an Asian trading currency. In the last few months China has inked US$100 billion in currency swap agreements with six countries including Argentina, Indonesia and South Korea. The yuan has become an official trading currency between South-east asia and two Chinese provinces along its periphery. “The yuan will next be used as a trading currency with India, Pakistan, Russia and Korea, Gu Xiaosong, Director of the Institute of South east Asian studies in Nanning told Newsweek.
Bilateral trade between India and China has skyrocketed 74 percent within the first two months of 2010, during this time Indian exports touched US$3.49 billion against China’s US$5.49 billion. Last year trade between the two countries fell to US$43 billion from a high of US$52 billion in 2008. Having already exceeded their target of US$40 billion by three years ahead of schedule, the nations are now aiming for bilateral trade worth US$60 billion by 2010-11, an all time high.
While like most Chinese banks, ICBC has higher capital ratios than its peers in the West or even in other developing countries, last week the bank announced it planned to raise as much as 25 billion yuan (US$3.7 billion) by issuing bonds than are convertible into the lender’s Shanghai-listed A shares. Subsequently the board also approved raising funds from an equity issuance in Hong Kong. Although specific details on size and timing weren’t announced, ICBC said it the issuance won’t exceed 20 percent of its outstanding H shares.
The 20 percent limit translates into a maximum issuance of 16.6 billion shares, based on ICBC’s outstanding shares in Hong Kong. If it issues that many new shares, it will be able to raise nearly 94 billion Hong Kong dollars (US$12.08 billion), based on its current price.