China, economically “conquered the world” by offering products at unbelievable prices. This led to the export boom that changed the face of the world over the last twenty years.
Manufacturers from every other country have scratched their head in bewilderment as to how the Chinese could sell at such prices. Many predicted that this was dumping and would soon collapse. It hasn’t for two decades. The prices continue to confound many.
Thus far, it was in products. In goods that you could touch and feel. Conventional wisdom was that China had no chance in services.
Think again. Bank of China, the world’s third largest bank is now offering mortgages in the UK that have undercut all the other lenders. The likes of HSBC and Barclays are left scratching their heads, much in the same way as their manufacturing brethren have been for the last so many years.
Maybe its just a flash in the pan. But experience says watch out for the Chinese. They have perfected the business model of huge scale and low margins. The financial sector has relatively fat margins. A disruptive player with a completely different business model and with utter disregard for “established norms of business” can change the industry in a few years.
The Chinese banks have a lot of advantages. They have access in their home market to massive retail savings at low costs. They know how to run businesses on low margins and achieve massive scale. Sure, they have lots of disadvantages too – you just need to visit a bank in China to experience it first hand ! But they are shrewd, learn fast, can adapt brilliantly and are not afraid to take on the world.
It will great to watch how they progress. As a consumer, you can only cheer loudly . The Chinese made many products affordable which otherwise you and I could not have bought. If they make the same thing happen in the services world – hurray !
In case you haven’t noticed, the top three banks in the world in terms of market capitalisation are Chinese.
Manufacturers from every other country have scratched their head in bewilderment as to how the Chinese could sell at such prices. Many predicted that this was dumping and would soon collapse. It hasn’t for two decades. The prices continue to confound many.
Thus far, it was in products. In goods that you could touch and feel. Conventional wisdom was that China had no chance in services.
Think again. Bank of China, the world’s third largest bank is now offering mortgages in the UK that have undercut all the other lenders. The likes of HSBC and Barclays are left scratching their heads, much in the same way as their manufacturing brethren have been for the last so many years.
Maybe its just a flash in the pan. But experience says watch out for the Chinese. They have perfected the business model of huge scale and low margins. The financial sector has relatively fat margins. A disruptive player with a completely different business model and with utter disregard for “established norms of business” can change the industry in a few years.
The Chinese banks have a lot of advantages. They have access in their home market to massive retail savings at low costs. They know how to run businesses on low margins and achieve massive scale. Sure, they have lots of disadvantages too – you just need to visit a bank in China to experience it first hand ! But they are shrewd, learn fast, can adapt brilliantly and are not afraid to take on the world.
It will great to watch how they progress. As a consumer, you can only cheer loudly . The Chinese made many products affordable which otherwise you and I could not have bought. If they make the same thing happen in the services world – hurray !
In case you haven’t noticed, the top three banks in the world in terms of market capitalisation are Chinese.
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4 comments:
Wow .... didnot realize their massive grip over the banking market .... I remember back in my days (when I was the intern)...they used to send this one stamping part for one of the Big 3 vehicles at 5 cents to the customer's door ....and I used to wonder ....how do they make money on that ... your post is a window to that world....great write up.
Hope others in the the world will look out and learn from them then all of us will be happy customers.
funny, this post did not reflect on my reader..saw ur 'DF' post before this..
this said, this is a very informative piece.. window to the world it is..
@blogueur - For the moment the Chinese banks are mostly in China only. They haven't really gone global. But they will,in due course.
@AJCL - Not sure what happened. Thanks for the nice words.
@rads - Yes; disruptive changes in cost structures can make a fundamental difference to all of us.
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