We recently came across a piece of news, which said that Chinese banks had been given the permission to buy major stakes with their American counterparts. These deals have been signed between the U.S. and China hoping to strengthen the business relationships between the two countries. This situation does raise a lot of questions in our minds; does it mean that we will now be seeing more Chinese banks here? Will our home loans be transferred to these new branches? Well, let’s take a closer look at the situation.
China and the U.S. are seeing mutual benefits from this deal. China is hoping that the U.S. will relax its controls on exports, especially of high-end technological products. While in return, the U.S. has asked China to increase the trade of ‘made-in America’ goods and services. According to the Federal Reserve, these measures are being taken in order to help stabilize the local economy.
The Industrial & Commercial Bank of China Ltd.,(ICBC) will be paying $140 million for an 80% stake in the Bank of East Asia’s (a publicly traded company based in Hong Kong) U.S. unit; gaining 10 branches in CA and 3 in New York. This is the first time that Federal regulators have allowed a Chinese bank to buy a majority stake in a U.S. institution. The Bank of China (third-largest Chinese bank) and the Agricultural Bank of China Ltd., (the fourth largest) have also received approval to open branches in Chicago and New York respectively.
What changes for us? We will soon be able to open accounts in ICBC’s branches and also invest and trade in Chinese currency with Yuan accounts. Hopefully, this will help boost the banking industry and bring good trends for our lenders and borrowers.