It's no secret that capital-rich Chinese financial institutions are set to aggressively expand outside the world's No 2 economy over the coming years, but it remains unclear where and how this ambition will be achieved.
Dealmakers and analysts expect mergers and acquisitions (M&As) by Chinese banks and insurance companies to be on the rise next year, and Southeast Asia is likely to be the most popular destination. The Chinese government's new leadership team may want to stay cautious on Europe and America until the financial situation there becomes more stable and clearer.
This follows the acquisition this year of ING's insurance business in Hong Kong, Macau and Thailand by Richard Li Tzar-kai, the younger son of billionaire Li Ka-shing, Asia's richest man. Bankers say Li's ING deal has boosted other investors' confidence in completing more M&As in the coming months.
"There is huge interest by Chinese financial institutions looking into buying financial firms in the Asean markets," said Matthew Kirkby, co-head of investment banking at CIMB.
Asean, the Association of Southeast Asian Nations, includes most of the major economic powers in the region, such as Singapore, Malaysia and Indonesia.
"Some European groups are divesting their assets [in the Asean region]," said Kirkby, who was the former head of global banking for Asia-Pacific at Royal Bank of Scotland before CIMB, Malaysia's No 2 bank, acquired some of RBS' Asian equities business earlier this year.
Kirkby noted that some European financial firms have decided to leave Asia not because they were not interested in the continent, the fastest-growing region in terms of economic output, but more due to capital-related problems in their home markets as the debt crisis in the euro zone worsened this year.
In addition to increasing buying opportunities in relation to the Asian assets of European and American financial firms, Chinese banks and insurers are also looking to buy stakes in small local financial players directly. Industrial and Commercial Bank of China (ICBC), the world's largest bank by market value and one of China's Big Four state lenders, acquired nearly 100 per cent of Thailand's ACL Bank in 2010 for US$550 million.
Financial industry sources said that ICBC is now looking at buying opportunities in other Asian countries that have close trade ties with China. For example, Indonesia, the resources-rich country that has long historical links with China, has already received major investments from Chinese investors, including China Investment Corp, the US$300 billion sovereign wealth fund.
Zhang Jianguo, president of Beijing-headquartered China Construction Bank (CCB), recently told the South China Morning Post that his bank intends to focus on network expansion in the Asia-Pacific region partly because of his clients' needs for financial services overseas.
CCB's expansion in Asia-Pacific is part of the bank's goal to establish a global network and business coverage by 2015, Zhang noted.
Additional reporting by Ray Chan and Kwong Man-ki