Shanghai gets
THE GO-AHEAD
4
china
WHAT'S NewS Issue 4 ApriM998
lt has been a long wait, but a Dutch trade mission to China in February was used
by the local authorities to set the seal of approval on our banking subsidiary
licence in Shanghai. Executive board member Rik van Slingelandt was there to
hear the confirmation of a lengthy process that has taken three years. We asked
him about the mission and how the new licence fits in with overall strategy.
According to Olivia Chen in Shanghai,
three years is actually the minimum
waiting period for licence qualification.
But elsewhere in RI, many are convinced
unfortunate remarks on China's human
rights record made puhlicly by the Dutch
minister of foreign affairs early last year
certainly slowed down the process. Van
Slingelandt is one of them. Although he
sees human rights as a major issue, he also
believes it would have been more prudent
and more appropriate to pass on Dutch
disaffection in a more diplomatic way.
'You don't make a billion people lose face
like that,' he says. 'It's just not the way
you should do it.'
You believe those remarks cost us a year?
Yes. We've been expecting word on the
licence for a long time now. I know our
people in Shanghai are breathing a sign of
relief that the confirmation has come
through. There is a lot of what we
consider bureaucracy in China and there
are a lot of hurdles you have to take
before the Chinese take you seriously. But
still, we had expected results rather
sooner.
Do we understand why the bureaucracy is
in place?
The Chinese are careful people. They want
to be sure you're serious, they want the
time to check you out - and that in their
time frame, not ours. They have an
economy which is very fragile, so they
don't want too many credit institutions in
the market - that's asking for inflation.
They want to control what is happening.
We learnt that only 15 banks a year are
receiving a licence; there are 60
applications. Fortunately, we were one of
them this year.
Why is the fact this is a licence for Shanghai
always stressed?
Because our licence is for activities in
Shanghai. If we want to upgrade our
Beijing rep office, we will have to go
through the whole procedure again. The
Chinese are very polite people. They don't
want to be rude so they make the
administrative procedures long enough to
satisfy themselves that you're a serious
player. They want flexibility on their side
to say: your application is being
processed, rather than saying: no, you
won't get it this year. During the trade
mission, the economie affairs minister
pressed the matter of our licence and it
was approved.
Did we as Rabobank press the Dutch
ministry? What kind of leverage do we
have?
Well, we're nice people (laughing), we
asked the minister nicely. No seriously, we
made our point that we are close to the
food industry, to the health care industry,
we have clients who want our services
there. We asked for ministerial support
and assistance to expedite the licence.
Working from Hong Kong had become a
real problem because we were liable for
withholding tax on interest payments so
we had to charge higher margins. That
meant we didn't have a level playing field
with the other two big Dutch banks - the
minister has to ensure we're all competing
with the same tools and resources. So the
minister talked to the Chinese authorities
about licences. Before we arrived, the
ambassador gave all kinds of messages,
along the lines of: the minister expects
progress has been made, that processes
would be complete, that is the kind of
wording that works.
Maarten van Alkemade and his team now
have the licence in their vault - what does
this new status mean for us?
It means we can get down to serious
business. We can go after our target areas,
deliver services that are needed. 1'm
thinking here of trade finance, APFT,
M&A and advisory services.
We're a subsidiary according to Chinese law,
what is the advantage?
We are now a Chinese bank. Our strategy
was to get upfront flexibility if we wanted
to bring in partners. For that we needed
Executive board's Rik van Slingelandt part
of the China trade mission
this kind of legal structure. We have to
know that we can deliver the services
clients need today, but also in the longer
term. We may invite the International
Finance Corporation, set up a good
partnership which also helps in the
evaluation of country risk management. A
Chinese structure gives us the opportunity
to bring in participations, if we want
them.
There are no plans to upgrade Beijing?
Not at the moment. It will remain a rep
office, at least for the time being. Maybe
we will want to change that at some time
in the future, hut we have not yet begun
the licensing application process for
Beijing. I think we have to start with
getting Shanghai up and running and
making some money there. This is a huge
country, you can't go in and expect to
cover all of it overnight. The Beijing office
does fantastic work in organizing
ourselves within all kinds of government
institutions. The people there were
instrumental in creating deals like the
dredger deal we closed during the trade
mission.
You're clearly very happy with the deal that
was done on dredger exports. Wouldn't a
F&A or health care deal have been a more
appropriate 'first' transaction?
The dredger deal is both, in my view.
Many areas of China have major
problems with flooding, water
management is not always effective there,
rivers are not used as transportation
routes. And if you then see how many
people have to be fed, how many people's
