I saw a post on Linkedin a couple of weeks back by a senior Australian banker asking if businesses were prepared for ChAFTA. The free trade agreement between China and Australia – which was signed in Canberra on 17 June 2015. There’s some water to flow under the bridge before it comes into force. But it will.
The interesting point about the article posted by the banker is that it raises an interesting question…are our local banks willing to lend to Chinese investors on terms that global banks (with a presence in China) are offering?
Now I’m not talking about preferential treatment, I’m talking about the basics. Such as:
- Will Australian banks that have a presence in China (I think three of the four majors now do) now take security over assets in China and lend against them in Australia?
- Will they accept Chinese financials or credit records?
If the answer to either of the above questions is no, then they needn’t bother. Just leave it to the Global banks.
Why am I saying this? I’m glad you asked.
We have been approached by a Chinese investor with significant cash to invest. He wants to use this cash and also borrow against his Chinese assets and cash flow. The local banks couldn’t say no quick enough. Enter the global banks, with Mandarin speaking, financially literate bankers and with policies that get the unique requirements of the Chinese investor.
Now I know that many Australian bankers (also with the required language and financial skills) will run circles around their Chinese counterparts but their organisation’s policies are holding them back.
Those of us with bald patches and a few grey hairs (I know…not necessarily mutually exclusive) will remember when the Japanese were similarly acquisitive in the 1980’s. The Japanese economy tanked and we went into a recession that resulted in a falling/stagnant housing market in the early 1990’s. I have no reason to believe that this time around it will end differently. But prudent lending will always win over avoiding risk altogether.
The Japanese investors had to rely on Japanese banks to open retail operations in Australia to service their clients.
Who will the banks lend to when the property boom comes to an end? Last time around it almost resulted in one of our major’s collapsing.
We’ve come a long way since then…I hope.