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China Construction Bank to Open US$150 Million Branch in Russia

By Marina Romanova

Aug. 23 – China Construction Bank (CCB) is going to open up a branch in Russia with a start-up investment capital of US$150 million, which will allow CCB to overtake the other two Chinese bank branches already working in Russia in capital volume.

The second-largest lender in both China and the world, CCB opened a representative office in Russia in May earlier this year. The bank said in a statement on its web site that the decision was made “to capitalize on growing trade between China and Russia.”

According to Russian statistic data, Russia-China two-way trade rose 43 percent in 2010 to top US$55 billion, making China Russia’s top trading partner.

“With bilateral banking cooperation showing its good development potential, CCB will increasingly pay attention to cooperation with Russian banking,” CCB President Zhang Jianguo told Xinhua News Agency.

Operating in Russia will also help lead CCB to do business in Eastern Europe.

“Russia is a (key) market of Eastern Europe as the market has enormous potential in economic development,” Zhang said.

Up to now, there are two Chinese banks branches working in Russia: namely the Industrial & Commercial Bank of China Ltd (ICBC) and the Bank of China (BoC).

According to the Russian information agency Interfax, the branch offices of ICBC and BoC had capital amounts of 1 billion rubles (around US$34.4 million) and 1.6 billion rubles (around US$55.1 million), respectively. Both ICBC and BoC are not inside the top-250 Russian banks in terms of the volume of initial capital. And from Russian bankers’ point of view, Chinese lenders haven’t delivered anything special so far.

“Like the other two Chinese lenders, I don’t think CCB will aggressively go into the Russian market,” said Alexander Lukin with Eastern Asian Study Center. “Judging by the usual strategies Chinese tend to use, they will not try to compete with local market leaders like Sberbank, and will keep on serving Chinese entrepreneurs and Chinese firms working in Russia instead.”

“Much like the CCB Johannesburg Branch in South Africa, the Moscow branch will most likely be engaged in the financing of infrastructure projects,” another source from one of Russia’s financial institution told to the Russian daily Vedomosti.

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