Introduction

At the Digital Intelligence Change and Common Wealth Summit on December 5, 2021, the "2021 Global Bank Internationalization Index" was jointly released by Zhejiang University International Business School (ZUZIBS), Asia Pacific Institute of Economics and Management (APAEM), Zhejiang University Institute of Financial Technology (ZUZIF), Beijing Frontier Institute of Financial Supervision and Technology (FIRST), and Zhejiang Association of Digital Financial Technology (ZAFT). The report is based on the AIF at Zhejiang University's "Internationalization Report of Chinese Banks," which was first published in 2015 and provides an in-depth analysis of the development status and changes of Chinese banks through five lists of nearly 150 banks from 40 countries in three dimensions: organizational internationalization, business internationalization, and profit internationalization.

"Stepping on Frost and Ice, Taming the Path" is the title of this report. The new coronavirus pneumonia (COVID-19) began to spread around the world in 2020, and the epidemic gradually replaced global trade disputes as the primary global systemic risk, with serious consequences for the economy, trade, finance, and other fields, further complicating the international situation. Banks need "tame their ways" and be brave enough to face the subsequent "ice" and find new methods to handle the new chances and challenges in the internationalization process as anti-globalization events become more common.

The Bank Internationalization Index (BII)

The Bank Internationalization Index (BII) was first published in 2015, and it has been seven years since then. The Banks Internationalization Index (BII) system has been optimized and innovated based on prior findings. To construct the BII, the data is obtained using crawler technology and manual verification, key indicators are screened using text similarity calculation and one-way ANOVA, and the weights of each layer are determined using hierarchical analysis and coefficient of variation method, striving for scientific objectivity and assisting banks in clarifying their open positions in the international financial market.

In 2021, 42 global banks and 35 regional banks will be ranked and analyzed internationally. The 77 banks in the BII list have a combined asset value of US$80 trillion, accounting for 60% of the global banking industry's total asset value. The global banks, which represent the most internationally prominent banking echelon, originate from 13 countries and include the Global Systemically Important Banks (G-SIBs) and major financial organizations in The Banker's Top 50 banks. Regional banks are represented by BRICS and countries along the "Belt and Road," with a focus on emerging market forces represented by the BRICS and countries along the "Belt and Road."

Global Bank BII Comparison: Head Gathering

Standard Chartered Bank (BII score 61.60) remains at the top of the internationalization list of global banks in 2020, having dominated the list for six consecutive years. SANTANDER CENTRAL HISPANO S.A., Barclays Bank, ABN AMRO, Credit Suisse and HSBC follow with BII scores above 50, exemplifying global operations.

The average BII score of the Top 20 worldwide banks is 40.87, which is approximately 4.09 times the average BII score of the 21st-42nd rank (9.99), indicating a significant disparity between the two echelons. All global banks entering the TOP20 BII list in 2020 are from developed countries in the top tier. Furthermore, Asia and the United States each have eight banks in the TOP20, while Europe has twelve, demonstrating the apparent international locational advantages of ancient capitalist countries like the United Kingdom, France, Germany, the Netherlands, and Italy. Chinese banks account for half of the 22 banks in the second tier (11), with Bank of China (21st, with a BII score of 26.87), Industrial and Commercial Bank of China (25th, with a BII score of 17.11), and Bank of Communications (30th, with a BII score of 8.55) occupying positions 21-30 in the BII ranking, and the remaining 8 occupying positions 31-42. The following 8 are in the 31-42 range, with a focus on the 36-42 range. These 11 Chinese banks are all Global Systemically Important Banks (G-SIBs) or in The Banker's Top 50 in terms of asset size, but their international performance is generally poor, and they still have great potential and broad room for development.

BII comparison of regional banks

In 2020, Sweden-based Nordea United Bank (BII score of 52.14) continues to top the internationalization list of regional banks. Singapore's UOB, OCBC Bank and DBS Bank all entered the TOP 10, demonstrating Singapore’s status as an Asian financial center; South Africa, Malaysia, India, Thailand and Indonesia all have banks in the TOP 20, demonstrating emerging market countries' international financial power and future growth potential. Regional banks come from a wider range of countries, with banks from 15 different countries making the TOP20 list (global banks TOP20 from 10 countries).

It's worth noting that 1/3  of the Top 20 regional banks are from RCEP member countries, including three from Singapore, one from Malaysia, one from Thailand, one from Australia, and one from South Korea, and the RCEP is the world's most populous free trade area with the largest economic and trade scale and the greatest development potential, with a significant impact on the development of the Asia-Pacific and global economies.

Specifically, the internationalization performance of banks in RCEP member countries has the following characteristics. First, member banks' internationalization levels are distributed in a ladder: the first echelon has a high international influence, such as Japan's Bank of Tokyo-Mitsubishi UFJ, Singapore's UOB, and OCBC Bank successfully entered the TOP 20 in the list of global banks; the second echelon, such as banks in China, Australia, Korea, and Indonesia, has a few representative banks with a high internationalization level, but the overall national internationalization level is low; the third Third-tier banks, such as the Philippine National Bank and the Industrial and Commercial Bank of Vietnam, continue to dominate their domestic markets and have not yet completed their banks' internationalization. Second, although the internationalization level of banks in RCEP member countries is on an upward trend, the BII scores of different banks are mixed. in 2020, the BII scores and rankings of banks in South Korea, Singapore, and Australia have improved as a whole, while some of the BII scores of banks in China and Indonesia have improved significantly compared to 19 years, but some banks' BII scores have regressed due to the impact of the epidemic.

Internationalization ranking of Chinese banks

Looking back, the accomplishments are remarkable, with large state-owned banks serving as forerunners in their respective overseas journeys, forming the global layout at the outset, and the synergy effect between domestic and overseas being remarkable; however, the future is hazy, with the spread of Newcastle pneumonia, the intensification of geopolitical friction, and the rise of the counter-globalization wave. It is meaningful to consider the internationalization of Chinese banks at this "tipping point" in history.

Based on the above index compilation scheme, this report calculates the BII values of five large state-owned commercial banks and some joint-stock banks, and ranks them as follows:

The internationalization of Chinese banks has greatly improved as the country's financial opening-up process proceeds. The number of countries with global presence has more than doubled to more than 60 in the ten years since Chinese banks went global; total overseas assets have exceeded USD 2 trillion, 3.5 times that of ten years ago; and total overseas revenue has exceeded USD 50 billion, 4.3 times that of ten years ago.

In recent years, with the deepening of global economic integration and the rapid expansion of RMB internationalization, Chinese banks accelerated their pace of internationalization and achieved great progress. Other national joint-stock banks, as well as some urban commercial banks and agricultural commercial banks, are increasing their overseas operations and investigating internationalization in their own unique ways.

The internationalization path of Chinese banks can be broadly divided into four categories regarding the development characteristics of each bank.

1、Policy Banks

Policy banks, such as the China Development Bank and the Export-Import Bank, are characterized by their primary focus on advancing the overall national strategy, and their international business expansion often precedes institutional development.

2、State-owned commercial banks

The six large state-owned commercial banks (including China Postal Savings Bank) are characterized by a mix of commercial and policy undertones, a head start in international expansion, and a focus on broad institutional network and product coverage. Judging from the BII index in the past two years, the six state-owned banks (including China Postal Savings Bank) have a clear leading position. In recent years, state-owned banks have taken use of their scale and brand advantages by taking on underwriting responsibilities for overseas issuances of RMB bonds on a number of occasions, allowing them to expand their international business space while diversifying their operations.

3、National joint-stock banks

National joint-stock banks, such as China Merchants Bank, are distinguished by their commercial principles, and instead of pursuing large-scale development, they focus on establishing the essential foreign backbone network to achieve distinctive characteristic development. The worldwide expansion of China's joint-stock banks has intensified in recent years, particularly the trend of establishing branches along the "Belt and Road." Eleven of the twelve joint-stock banks now have international branches.

4. City and agricultural commercial banks

City merchant banks, such as Bank of Beijing and Bank of Shanghai, and agricultural merchant banks, such as Guangzhou Rural Commercial Bank, are characterized by their focus on serving local and indigenous enterprises, so the number of overseas institutions and the proportion of their overseas revenue is relatively limited. . They are, nevertheless, looking into international development options that are tailored to their needs. Bank of Beijing is one of the "leaders" among them. Bank of Beijing has been experimenting with internationalization in recent years, opening offices in Hong Kong and Amsterdam, respectively, setting a "leading role" for other urban and rural commercial banks in China and laying the groundwork for the bank to open branches overseas and expand its international business.

Conclusion

Initially, the overseas expansion of Chinese banks was carried out through the "point" model of opening branches and overseas M&A. Before 2006, the overseas expansion of Chinese banks was mainly based on the establishment of branches; while after 2006, the overseas expansion of Chinese banks was mainly based on the initiation of cross-border M&A. According to incomplete statistics, a total of 25 cross-border M&A activities of Chinese banks occurred from 2006 to 2020. This new expansion mode accelerates the "point" layout of Chinese banks, which not only increases their market share in the relevant regions and expands their customer resources, but also lays a solid foundation for the "line" international layout afterwards.

With the gradual promotion of "One Belt, One Road", the internationalization layout of Chinese banks gradually tilted to the regions along the "One Belt, One Road", and became the "One Belt, One Road" based on the cities along the "One Belt, One Road". The international layout of Chinese banks is gradually tilted towards the regions along the "Belt and Road" route, and has become a "face" layout based on the cities along the "Belt and Road" route. By the end of 2020, 11 Chinese banks had established more than 80 primary branches in 29 countries along the Belt and Road.

All in all, the pace of internationalization of Chinese banks is closely related to the deepening of China's financial opening. Over the past few decades, the medium-to-high-speed growth of China's economy, the reform and opening up of the financial market, the continuous promotion of RMB internationalization, the introduction of the "Belt and Road" initiative and the accelerated pace of Chinese enterprises' "going out" will also usher in a period of rapid development for the internationalization of Chinese banks. A period of rapid development.

The report was first released by the Zhejiang University International Business School (ZIBS) and the Cambridge Centre for Chinese Management (CCCM) in the Cambridge Judge Business School in March 2021. For more information about the DOI index, the report as well as the list of Top 100 most international Chinese enterprises, please refer to the report on the Internationalization of Chinese Enterprises 2021.

Appendices: BII List

Most International Global Banks

Data Source: AIF

Most International Regional Banks

Data Source：AIF