Banking industry transformed by reform

By Rena Li in Los Angeles/ China Daily 24-09-2024

With more than two decades of experience in foreign exchange management, Ye Chun, who heads the Los Angeles branch of China International Trust Investment Corp, has navigated the complexities of China’s evolving financial landscape.

From his early days at the State Administration of Foreign Exchange, or SAFE, to his current business leadership role in the United States, Ye’s journey has been one of transformation and resilience.

After graduating from Renmin University of China in 1996 with a master’s degree in economics, the 56-year-old began his career at the SAFE, where he worked in the capital account management department until 2001, specializing in foreign debt management.

The transformative period from the 1990s to the early 2000s brought about significant changes in China’s foreign exchange-management regulations and policies.

“I was actively involved in this transformation, and the experience laid a solid foundation for my subsequent career in international foreign exchange,” Ye told China Daily.

In 2001, Ye transitioned from SAFE to CITIC Bank and took responsibility for foreign exchange management and trade financing.

“At that time, China was in the midst of joining the WTO and undergoing significant reforms to open up to the global market. I was fortunate to transition from being a policymaker to becoming a hands-on practitioner in the field,” Ye said.

Founded in 1987, CITIC Bank was one of the earliest emerging commercial banks established during China’s reform and opening-up period. It became the first commercial bank in China to participate in both domestic and international financial markets. As early as the 1980s, CITIC Bank expanded its presence by establishing branches in New York and Los Angeles to assist Chinese enterprises engaged in cross-border trade.

In 2012, Ye transitioned again from CITIC Bank’s Hong Kong head office to its US branch in Los Angeles. “Each market has a very different regulatory system and market structure,” he noted.

One of the major challenges faced by CITIC’s Los Angeles branch then was its small scale and limited risk resilience.

Adding to the challenge were US regulations regarding foreign banks. Branches that entered the US market after 1992 were not granted Federal Deposit Insurance Corp membership, which provides deposit insurance for amounts up to $250,000.

Without the insurance mechanism, foreign banks were unable to offer private banking services, prompting them to seek and expand into alternative customer segments.

As China’s reform and development advanced, more Chinese State-owned and private enterprises began investing in international markets. Between 1979 and 2000, large Chinese State-owned enterprises were authorized to invest primarily in the US market.

Local US banks often had limited experience dealing with Chinese enterprises, making it difficult for them to assess creditworthiness and provide the necessary services. Consequently, new Chinese enterprises faced challenges in opening accounts, making remittances and obtaining loans.

“Chinese-funded banks became a crucial source of investment and financing for these enterprises as they expanded their operations overseas,” Ye said.

He mentioned Synear Foods, a Chinese frozen-food company that in 2013 purchased a production line in Los Angeles to produce dumplings for the North American market. When Synear sought a loan from local US banks, they faced challenges due to a lack of credit history, making it difficult to secure a mortgage.

As CITIC Bank had been working with Synear for more than a decade in China, it was able to swiftly provide a $30 million loan to facilitate the purchase and registration of the production line in Los Angeles.

By mainly supporting Chinese enterprises in their global expansion, the bank helps them comply with US laws and regulations while providing tailored financial products.

“To achieve this, our team must possess cross-border market thinking and the ability to design innovative financial solutions,” explained Ye.