China Construction Bank to develop its banking in Russia

China Construction Bank will develop its operations in Russia
China’s second largest bank, China Construction Bank (CCB), will invest around $150 million to develop its Russian subsidiary, with analysts saying the bank is eyeing the growth potential of Russia’s banking market.

After opening a representative office in Russia in May this year,CCB decided to push ahead into the market, joining The Bank of China (ELUOSI) and the Chinese Bank of Commerce and Trade as the only Chinese banks with a Russian presence.The move comes after the high profile departure Santander and Barclays from retail operations in Russia, in recent months.

Chief economist at AFK Sistema, Evegny Nadorshin, told Kommersant that the move highlighted the attraction if the Russian market for Asian banks on commercial and geopolitical grounds, with Russian banking assets having become cheaper. Unicredit Securities head of corporate finance, Oleg Ponomaryov, added that a key factor behind the departure of major western banks from the Russian retail market was problems in their home markets, which caused their Russian pull-out.

“Asian investors have no problems, which is coupled with the fact they have significant money resources to expand business beyond their market.”

Industry players believe CCB is likely to move into Russia’s mortgage or logistic infrastructure financing markets.But Alexander Lukin, head of the Research Centre for Eastern Asia and The Shanghai Cooperation Organization, told Vedomosti that CCB was most likely to concentrate on servicing Chinese population living in Russia, which basically wouldn’t have too much influence on Russian market.