China Law Blog

I frequently post (here, here, and here, for example) on the many opportunities for foreign service firms in China.  China's banking and financial services sector is rife with opportunities for foreign service companies. 

Willie Sutton robbed banks because "that's where the money is."  The same holds true in China and that is also a good reason to sell them high end financial technology solutions.  In this recent Seattle Times article, entitled, "Banking on China's potential," Kristi Heim (a Seattle Times business reporter who has spent considerable time in China) does an excellent job explaining how a couple of Seattle technology firms are achieving such sales.  Apollo Technology and Captaris provide Chinese financial institutions with advanced solutions for processing loan requests, measuring credit risk, managing client relationships and analyzing data. 

Apollo is working with Shenzhen Development Bank and Bank of China to improve their loan decisions speed and to reduce their default loan rates.  In providing its software to China banks, Apollo is always mindful of protecting its intellectual property:

Considering the poor climate for intellectual-property protection in China, Apollo has kept its development team in Bellevue and hosts its software on a server managed daily by employees there. Customers in China don't have access to the source code.

Even with the risks of piracy, said [Matthew] Maa [Apollo's Chief Technology Officer], China has few technologists with expertise in financial services, so the opportunity is ripe for companies with creative solutions.

"IT firms in China do not have a financial-technology background," he said. "They are good at copying products, but not good at creating new stuff."

Captaris sells its document-delivery software to both foreign and domestic banks in China, including the Industrial and Commercial Bank of China, China's fourth largest bank, and Shanghai Pudong Development Bank.  Captaris markets its RightFax software to China for rapid transmittal of customer documents like bank statements, credit-card statements and credit-card applications.

Chinese banks have a dire need to get their various monitoring systems under control:

Banks in China now face a variety of pressures: They have to stay afloat without government help, but most haven't done enough to improve management and evaluate risk when making loans during a massive credit expansion.

Banks are eager to list stock on foreign exchanges, but doing so requires modernizing their systems. To conform to international financial practices, they're spending hundreds of millions of dollars to train employees and upgrade technology infrastructures.

The four biggest banks are still in a precarious position with so much debt from bad loans to state-owned enterprises.

Just yesterday, Washington Post China correspondent, Peter S. Goodman, wrote an article on a bank fraud in excess of (cue Dr. Evil voice) $1 Billion dollars at the Agricultural Bank of China that noted shortcomings in Chinese banks' credit and risk-management systems:

On Tuesday, the debt-rating agency Standard & Poor's underscored those concerns, declaring that China's banks face "increasing vulnerability" from the widening volume of lending. The agency credited China's banks with some improvements in their governance but stressed that "their developing credit- and risk-management systems are likely to be severely stretched by rapidly changing economic conditions."

China's banks have considerable money and considerable problems, both of which give rise to many opportunities for foreign service firms.