Deutsche Bank ready to help German companies’ China ambitions as trade war pushes Beijing closer to Europe, says Asia chief

  • Werner Steinmüller, CEO for Asia-Pacific, says the bank has increased investments in its technology platform, is hiring new staff in China and looks forward to expanding its onshore securities capabilities
  • There is a ‘clear advantage to both sides’ in more cooperation between Germany and China, he says
PUBLISHED : Monday, 17 December, 2018, 7:33am
UPDATED : Monday, 17 December, 2018, 7:37am

Deutsche Bank said it is ready to support German companies’ growing ambitions in China.

It expects German firms to increase their investments as the US-China trade war prompts Beijing to deepen its ties with Europe, according to the banking giant’s Asia-Pacific boss.

As the trade war with the US escalates, China has become more receptive to proposals by other foreign companies for market access, in a gesture to show the country is still opening up to the rest of the world.

In October, German car maker BMW said it would pay 3.6 billion euros (US$4.2 billion) to take control of its Chinese joint venture in 2022, after Beijing announced it would scrap foreign-ownership limits on local car firms and fully open up the market by that year.

The deal showed “China will not change its opening-up policy, and instead will open up further and deeper”, according to Premier Li Keqiang during an October meeting with BMW’s chief executive officer, Harald Krueger, in Beijing.

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In August, Ludwigshafen-based BASF, the largest chemical producer in the world, said it plans to build China’s first wholly foreign-owned chemicals complex in Guangdong province, an investment expected to be worth US$10 billion by 2030. The deal is a rare one in China’s energy and chemical sector, which is usually under the tight control of the government.

“The trade war is likely to encourage the European Union and China to work much more closely together. And Germany is a key country in the EU,” Werner Steinmüller, said chief executive officer for Asia-Pacific at Deutsche Bank, in an exclusive interview with the South China Morning Post.

“There is a clear advantage to both sides to see increased cooperation between Germany and China.”

He said German companies are still optimistic about the business outlook in China and are expected to increase their investments.

“We are supporting our clients with their ambitions in China,” Steinmüller said, citing a recent survey by the German Chamber of Commerce in China.

“As the survey shows, two thirds of German companies plan to invest more in China in the next two years.”

The Chamber released a business confidence survey last month, which indicated the majority of German companies see China as an important market with good business opportunities.

Steinmüller said Deutsche Bank had advised BMW’s recent deal to take control of its Chinese venture and hoped to offer support to more similar moves by German firms in China.

Deutsche Bank predicts that the trade war will have a limited impact on China’s economic growth, which it sees at around 6.2 per cent to 6.3 per cent for 2019.

China is currently Germany’s largest trading partner, with bilateral trade totalling 186.6 billion euros (US$230 billion) in 2017, almost a third of China’s trade with the European Union.

In July, German chancellor Angela Merkel and Chinese Premier Li met in Berlin and unveiled US$23 billion worth of bilateral deals, which included BASF’s chemical complex project. Li said he expected the two countries to enhance economic and trade cooperation and open up further to each other in technology investments.

Steinmüller said as China opens up further, his bank hopes to play a bigger role in facilitating cross-border transactions and the business activities of multinational companies, both inbound and outbound.

“We want to support the German-China corridor,” Steinmüller said. “Our bank’s first international presence in 1872 was in China, and that purpose has not changed.

“China is getting more open. It has made a lot of big progress, specifically in the banking industry and capital markets in the last nine months.

“I would welcome it if it continues the openness; not only for banks, but also for corporates.”

Touching on the firm’s China strategy, Steinmüller said the bank sees an opportunity to offer more “sophisticated and tailor-made” asset management products for Chinese investors, who are increasingly keen to diversify their assets because of the “wealth creation in the country”.

In the short run, the bank has been investing in its technology platform, particularly its global transaction banking division, which offers cash management, trade finance, and securities services for corporates and institutional investors.

It is also hiring staff, not only in the technology area, but also in client coverage for China.

In the longer term, Steinmüller said the bank is looking forward to expanding its onshore securities capabilities when the right moment comes.

Currently, Deutsche Bank has an onshore securities joint venture with Shanxi Securities, in which it holds a 33.3 per cent stake. Its asset management arm also has a partnership with Beijing-based Harvest Fund Management.

JP Morgan says it’s still firmly on track to launch China venture next year, regardless of trade spat

Last month, China’s securities regulator gave approval for the Swiss bank UBS to increase its stake in its onshore securities venture to 51 per cent, making it the first foreign bank to control its local business venture under new rules announced by Beijing last year.

JP Morgan and Nomura have also applied to set up majority-owned joint ventures.

Last November, Beijing announced it would raise foreign ownership limits in financial firms to 51 per cent from the current 49 per cent ceiling. Full foreign ownership of securities firms, futures companies and fund houses will be allowed after three years. For insurance companies, the cap would be removed in five years.