Wharton Journal

Issue date: 4/26/10 Section: News

On April 19th, Dr. Ma Weihua, President and CEO of China Merchants Bank, came to Wharton to share details of China Merchants Bank's history and the bank's strategy going forward with over 100 students. As the first share-holding commercial bank wholly owned by corporate legal entities, China Merchants Bank developed over 23 years to become the sixth largest bank in China with assets of $ 200 million. Dr. Ma stressed that currently the bank's main task is globalization.

In 2008, the firm took its first step towards globalization by acquiring Wing Lung Bank, the fourth-largest bank in Hong Kong; this became the largest merger and acquisition in the Chinese banking industry. "Hong Kong is one of the financial centers of the world. By acquiring a bank in Hong Kong, China Merchants Bank is testing the road for prospective acquisitions of foreign banks," Dr. Ma said. "In addition, our firm is based in Shen Zhen, which shares geographic and cultural intimacy with Hong Kong. In this aspect, the risk of our deal was greatly mitigated."

Dr. Ma is well aware of the risks that face the banking industry. He said, "When I came to [the USA] in 2008 to host the opening ceremony for China Merchants Bank's New York branch, I would have never expected that after a five-year endeavor, our efforts would be welcomed by Wall Street's coldest winter." The chilly experience to which Dr. Ma referred was the United States' most severe financial crisis since the Great Depression. Painfully close to the impact of the crisis, Dr. Ma compiled what he saw and heard in his book Reflect on Wall Street. Dr. Ma said, "Who is right, who is wrong, is no longer that important. Crisis is the starting point of great changes. It changed a lot of peoples' destinies and also brought to China a lot of inspiration."

Dr. Ma's experience in New York inspired him to reassess China Merchants Bank's strategy. "At this moment, [rather than continuing expansion efforts], we should focus on strengthening internal management. This is the Chinese banking industry's Achilles heel."

Dr. Ma explained the opportunities for Chinese commercial banks as follows: first, urbanization and industrialization has provided the Chinese economy with sufficient room to sustain a high growth rate. This in turn leads to more opportunities for the banking industry, especially the industry leaders. Second, there has been an overwhelming change in Chinese people's consumption behavior. The Chinese are now using credit cards more frequently. Third, mortgages have become a necessity for the majority of households. Fourth, according to a BCG study, Chinese household wealth is expected to grow at a rate as high as 17%. In 2013, total household wealth is predicted to reach $ 7.6 trillion. "Our next growth opportunity is wealth management," Dr. Ma said.

Continued...

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