AT a time of rising debate on protectionism coming mainly from developed Western economies, China’s Belt and Road initiative is being touted as a major driver of globalisation, promising to boost world trade and investments if it is executed efficiently.
And with Standard Chartered Bank’s (StanChart) broad presence across the Belt and Road routes, it has a unique competitive advantage to help facilitate trade, capital and investment flows for destination countries, which includes Malaysia.
Group chairman Jose Vinals says the initiative is “strategic priority” for the British multinational bank, where it recently committed to facilitate financing of at least US$20bil between this year and 2020.
“StanChart is a truly global bank.
“We have the deep and long-standing presence in 45 of the 60-plus markets along the proposed Belt and Road initiative routes.
“Last year, we were involved in 50 projects related to the initiative and we intend to continue playing a key role by fully making use of the bank’s unique network, franchise capabilities and rich client experiences.
“For us it is a strategic priority and we are working closely with our Chinese counterparts and with many of the countries,” he tells StarBizWeek in an exclusive interview.
Of these deals across a range of products and services, around half were in Africa, a quarter in South Asia, while the remainder was from across the rest of the Belt and Road footprint.
The bank currently makes around 85% of its income from Asia, Africa and the Middle East.
“Malaysia is one of the top markets in Asean for StanChart and we continue to look at infrastructure projects that are happening here.
“We are keenly looking at the high-speed rail and engaging with our counterparts in China to explore the East Coast Rail Link project.”
Vinals was in Malaysia early this week for meetings and a visit to the bank’s main branch in Jalan Sultan Ismail – his first since being appointed group chairman of the bank in December 2016.
The 64-year-old was previously from the International Monetary Fund, where he was the financial counsellor and director of the monetary and capital markets department.
Vinals started his career as an economist before spending 25 years at the Central Bank of Spain where he rose to become its deputy governor.
With other global banks also clamouring for the billions of dollars in deals, loans and advisory fees, Vinals fells that StanChart’s understanding of both the home and destination markets gives it a “unique competitive advantage” over others.
“We have a presence that dates back to a century in many of those countries.
“As for China, we are the longest standing bank there with a presence going back nearly 160 years.
“So, we know what the Chinese companies want and we understand the destination countries, some of which are complicated markets.
“Finally, we are plugged in international financial markets like London, Hong Kong and Singapore.”
Vinals says StanChart’s commitment to facilitate Belt and Road financing will be as an intermediary and service provider across a full range of lending, financial markets, transaction banking, capital markets and project finance activities.
Since the launch of the initiative by the Chinese government in 2013, StanChart has done about 100 deals – a tangible sign that the ambitious infrastructure project connecting China to South-East Asian countries, Europe and Africa is now well into the implementation stage, says Vinals.
To increase access to financial services for clients based in economies related to the Belt and Road initiative, StanChart has also entered into strategic partnerships with other entities such as Ant Financial Services, which is the financial arm of Alibaba group.
More recently, it signed a memorandum of understanding with China Development Bank, a policy financial institution under China’s State Council.
With trillions of dollars in deals awaiting, he says the Belt and Road initiative can be a win-win for both China and the countries which are recipients of the projects.
More so as the world’s largest economy, the United States, retreats to focus on domestic affairs.
“But a critical factor is transparency and good governance and its execution, consistent with the commercial viability of the projects,” says Vinals.
“I look forward to these sound principles being applied to Belt and Road projects for a more inclusive type of globalisation than the one that we have had so far.”
During the interview, Vinals also spoke about the global economy and issues related to the banking sector.
He says the volatility shock wave that wiped out billions of dollars from global markets in the last few days is not totally unexpected, but more importantly, fundamentals of the global economy remain sound.
“Markets move up and down.
“We have been having very positive equity markets in the world, but some of these markets, particularly in the US, may have reached valuations which are quite rich.
“So, it was due for a correction at some point.
“The more important thing is that the fundamentals of the global economy are sound.”
He notes that the global economy is expanding at close to 4%, which is the strongest rate since 2009.
It is also broader and healthier.
“Two-thirds of the countries in the world are on an expansion mode and they are seeing growth accompanied by a recovery in world trade.
“Global trade is growing at a rate which is faster than global GDP and this happened last year and is expected to continue this year and next.”
He points out that this trend is happening for the first time since the global financial crisis and it is “good omen” for the current year.
Notwithstanding this, there could be short-term volatility should the US’ Federal Reserve (Fed) raise interest rates faster than what markets are expecting.
If that were to be the case, then it would undoubtedly lead to further corrections in financial markets.
What this could translate to is capital flows to the country with the higher interest rate differential, which is the US.
“That is certainly a risk.
“And that is why it is important that emerging markets and developing economies have strong fundamentals so that they are perceived as strong and regarded with confidence by international investors.”
He says Malaysia, which has seen sound and steady economic growth, is in a strong position to withstand any volatility in international capital flows.
“But my take is that the Fed will continue with a measured pace to raise interest rates.
“Let’s not forget the reason the Fed is raising rates is that the US economy is much stronger now,”
He notes that there is now more balanced growth coming from advanced and emerging economies.
“China, which has had very high growth rates of about 10%, is now growing at about 6% or so.
“This is something that is a lot more sustainable and good for China, Asia and the world.
“On the other hand, advanced economies are now recovering at a stronger growth pace.”
As for banking, he says the new challenge for international banks is not from fintechs but the big techs – companies like Alibaba, Amazon, Google and the Apples of this world.
These giants, he says, provide services like those of banks in a way that’s as easy as a click of a button on a mobile.
However, they don’t face the same stringent requirements that banks need to adhere to.
So, international regulators must look to regulate these big techs for a level playing field, he says.
Taking a leaf from fintech, he says StanChart has embraced the digital revolution and created fintechs inside the bank or partnered with other fintechs to explore synergies and bring the best of the fintech world to its operations.
“Historically, if you look at it, we have been a very innovative bank.
“We are the first international bank to introduce Islamic banking products in Malaysia.
“We have been in this country for the past 143 years and it tells you something about our commitment.”