GOING GLOBAL: ICBC Chairman Jiang Jianqing (third left) and Belgian Prime Minister Yves Leterme (third right) attend the unveiling ceremony of ICBC's Brussels branch on January 19 (WU WEI)

While the yuan expands its global reach, Chinese banks found a propellant to go global. The People's Bank of China, the central bank, launched the pilot program of yuan settlement in cross-border trade in 2009. In its latest move, it announced in January that qualified enterprises could settle their overseas direct investment in the yuan. All these measures need support and cooperation of Chinese banks' overseas branches.

The post-crisis era, Cao said, will present the best opportunities for Chinese banks to expand overseas because many international financial institutions will need time to regain their footing. Emerging economies have become the major power driving the global economy. So, qualified Chinese commercial banks should improve their competitiveness by expanding overseas, Cao added.

Chinese banks usually conduct their overseas expansion through establishing overseas branches and acquiring overseas banks.

Compared with their foreign counterparts, Chinese banks have a much lower level in global operations. According to Li, the overseas business revenue of China's five major state-owned banks accounted for only 6 percent of their total business revenue, while that of European and U.S. banks stood at 35 percent.

In an effort to improve their presence in overseas sectors, Chinese banks used mergers and acquisitions (M&A) as a shortcut. What should be noted is that ICBC started its foreign expansion by acquiring some banks in East Asia and South Africa. Given the fact that the U.S. market was a major player in the international financial market, ICBC's takeover of Bank of East Asia USA is considered a big stride into the global market.

As for Chinese banks' overseas ambitions, banking regulators showed their support. M&A should be an important means for Chinese banks to expand overseas, along with establishing overseas branches, said Wang Zhaoxing, Vice Chairman of China Banking Regulatory Commission. The commission will also promote Chinese banks' development in their overseas target markets while allowing foreign-funded banks to conduct business in China in line with the principle of mutual benefit and equal status, said Wang.

No easy job

"Overseas expansion is an imperative trend for Chinese banks, but the difficulties should never be neglected," said Lu Zhengwei, chief economist at Industrial Bank Co. Ltd.

Difficulties will be both internal and external, Lu said.

Internally, Chinese banks are not fully prepared for going global and the biggest problem is a lack of professional talents, especially talents familiar with foreign finance and law, said Lu. Meanwhile, they lack a profit model. Take BOC for example. Few of its overseas branches are capable of turning a profit.

Externally, foreign financial regulators impose much stricter restrictions and protectionism also prevails, said Lu.

Another state-owned commercial bank—China Construction Bank (CCB)—submitted an application to establish a subsidiary bank in New York to the Federal Reserve as early as 1993 and didn't get permission until May 2009, said Mao Yumin, Director of Investment and Wealth Management Banking at CCB.

Not all banks are qualified to go abroad, said Xiao. Those banks, he said, who are qualified should meet five requirements: excellent corporate governance mechanism and risk management capability; strong capital reserve; high profitability; worldwide customer base; and international talents familiar with overseas markets and regulations.

Chinese banks' overseas branches are mainly located in regions like Hong Kong, Macao and Singapore, which have similar cultural background with the Chinese mainland, said Li. Only a few of branches are in New York and London. And their business scope, operational scale, customer base and market influence are all limited.

One reason is Chinese banks' lack of professionals familiar with foreign financial culture and investment rules, said Li. In addition, Chinese banks' risk management ability needs to be improved, and their systems, technologies and experiences still fall behind their international counterparts.

For most Chinese banks, the most urgent and important task is not "going out," but fostering high-caliber professionals and improving management skills, to get fully prepared for overseas expansion.