China Top Priority for HSBC

HSBC Holding Plc has the largest network of branches of a foreign company and China, and they have no thought of slowing down as they look to add more branches and employees throughout 2010.

“We certainly expect to continue with our existing rate of expansion,” Richard Yorke, chief executive officer of HSBC (China) Ltd., said in an interview. “In terms of long-term strategic importance, China is probably at the very top.”

With its U.S. division continuing to struggle in a weak market, HSBC  has a goal of having 100 branches in China by the end of 2009, with the idea of putting together a stock offering on the Shanghai exchange. HSBC is based in London.

To show the importance of China and the region to HSBC, 52 percent of its earnings in the first half of the fiscal year came from the Asian behemoths. Other markets of interest to the financial giant are Latin America and the Middle East.

With deposits in the country coming in at over $6.5 trillion; including corporate and consumer deposits, foreign banks flooded into China when it was opened to overseas institutions. One advantage HSBC has is they are able to offer serviced that are denominated in the yuan for Chinese consumers.

So far banks from outside of China only hold assets of $190 billion in the country, which accounts for only 2.2 percent of the overall total in the country. Domestic competitors on the other hand increased asset holdings by 19 percent.

Part of the disadvantage at this time for any foreign financial institution operating in China is the lack of political connections to land large infrastructure funding projects, and they lack the size to do that as well within the country at this time.

While being difficult to compete with the state-owned banks in China, it is possible, but like any business, you must offer something unique and different to attract new business with the game rigged to the advantage of Chinese banks.

The weak economics has resulted in a number of competitors to leave the Chinese market, selling their assets there to raise much needed capital. That has left HSBC in a strong position going forward, which could significantly add to their bottom line, while strengthening their position in China going forward.

As of now, HSBC has 88 branches in China valued at about $8.2 billion. They’ve added over $17 billion in deposits in their Asian strategy over the first month; including, along with China, Hong Kong and India.

Expectations are that after getting rid of 12,000 jobs around the globe, the company is set to add close to 1,000 jobs in mainland China throughout 2010.