SEIDLITZ: If you are so optimistic about China why expand in distant shores like Chile in South America, transfer your bank holding to London, and do rather limited business with China? Gray: We had to close most of our [China] branches after 1949, except Shanghai. There was little we could do. There are still constraints today. The banking system has not been totally opened up to foreign competition. And I suppose it never will be.
Seidlitz: Is that because Chinese banks can't compete with banks like yours? Gray: When you are transforming the whole of the economy you have to go fairly slowly. There are also historic reasons.
No doubt, 70 or 80 years back China was exploited. People don't want to go back to times where the economy will be dominated again by Western business interests. Those thoughts are not unique to China, you only have to look to Malaysia or Singapore.
Seidlitz: So no retail business for your bank in China? Gray: Even if the doors opened more, it would be difficult to break into this market. But you can do a lot in retail banking without having to have concrete on the ground in every village in the country.
The main barrier now is the inability of foreign banks to do renminbi business. That should be the next major step to come, but I don't have a time-frame. But I think that door will be open in time.
The other barrier is, of course, the foreign exchange market, which already has changed. The dealings, which were previously in official rates, have been taken over by the swap-centres. It's not a perfect market yet, but they are moving in the right direction.
Seidlitz: So what is your China strategy? Gray: We do trade financing, of course. Which is normally on a 120-day cycle. We know the clients on both sides of the transaction. If you go beyond that, which is really short-term financing, you have to look at a variety of different loan opportunities.