Photo: Bank of China Chairman Mr. Ge Haijiao, Chinese Ambassador to PNG H.E. Zeng Fanhua, PM Marape and Bank of China PNG Representative Audrey Zheng.
China-Papua New Guinea relations have reached new heights with the opening of a representative office of China's most globalised and integrated bank in PNG on Thursday 1st June, 2023, at the Stanley Hotel in Port Moresby.
Prime Minister James Marape was a guest speaker at the inaugural launch of the Bank of China's (BoC) representative office that was hosted by the Bank's Chairman Mr. Ge Haijiao and Chinese Ambassador to PNG H.E. Zeng Fanhua. along with other dignitaries from the bank and China.
While addressing the Bank of China's representative office inauguration, Mr Marape highlighted the need for a new bank to be established to cater to the country's unbanked population, as well as the introduction of new financial products into the country's banking space.
"PNG looks forward to the input and entry of the Chinese bank into the PNG market, which is an important contribution, as the country is moving forward and its volume of trade with China grows bigger," the Prime Minister said.
Mr Marape said the event was a momentous occasion for the Bank to establish ties with PNG, as it demonstrates confidence in the country's economy.
He added that the establishment of the Bank of China's representative office marks confidence in the stability of the government and the independence of the three arms of the State.
"Let me assure you that your entry into the country is right on the verge of the next phase of an important economic boom," the premier said.
"A boom that will catapult us into a middle income earning nation at the very earliest which all of us including the executive government, the parliament, our constitutional offices, independent organisations like the Central Bank and every one of us to work intently to make sure that we reach this important milestone," he said.
"In 1975, our economy was under K5 billion, today our economy is K113 billion, within the next seven years, we want to go into a K200 billion economy to sustain our population that is now past 10 million people" Mr Marape said.
He added that over half of the country's population remains unbanked, and there is a need for a new bank with a introduction of new financial products.
"Close to 60-70 percent of our people are unbanked, most of our people or small SMEs are yet to fully migrate into the formal economy, so imagine if 10 million-plus people in the next 10 or so years are all in the formal economy and are participating actively," he said.
"It will be a very significant boost to have such a high-profile and highly-respected global banking group enter the PNG market to not only serve PNG, but also the South Pacific Region with Port Moresby as its regional headquarters," PM Marape said.
"My Government is keen to see more new banks enter the PNG market to increase competition, to help reduce interest rates, banking fees, expand services to unreached areas using various e-banking platforms, and also to reduce the long queues in all our banks today".
“It will also create thousands of new jobs which our country badly needs," Mr Marape stressed.
The Prime Minister said the entry of Bank of China would also enhance the Government’s plans to strengthen and deepen the trade and investment relationship between China and PNG.
“Our Government will also set up a Trade Mission in Shanghai to be headed by a Trade Commissioner, whose focus will be to secure more foreign direct investments from China into PNG and secure more Chinese markets for our goods, including our LNG gas and agriculture, fisheries, marine, and forestry products.
"China, with a population of over a billion people, is a very big market that is ready to accept more PNG products. The Government is excited about the plans of the Bank of China as it is a big vote of confidence in PNG as an investment destination and also of my Government’s economic management of the country."
Mr Marape welcomed the Chinese bank and offered support to complete its operational licence and becoming a fully fledged bank. He hopes the Bank of China will facilitate transactions between the two countries, and that the business partnerships will sustain into the future.
Economic Impact: The launch of Bank of China's international branch in PNG is likely to have an impact on other commercial banks in the country.
As a well-established bank with a wide range of products and services, Bank of China's entry into the market could lead to increased competition for customers and market share.
The bank's emphasis on offering cashless services and products will benefit the Asian population including the Philippines, Bangladesh, Chinese, and other Asian nationals in the country to do their banking services and may also attract customers who prefer digital banking options.
With its current representation in the country, the Bank of China is likely to provide one-stop service solutions, which include policy consultation, foreign currency exchange, international settlement, letter of guarantee, financing, cash management, customs clearance assistance and other significant customized services
Bank of China's chairman Ge said the bank will continue to leverage its advantages in globalization and strengthen the construction of a collaborative service network in the South Pacific region.
The in-country group, he said, are proud to be one of the 300,000 employees of the Bank of China, and the launch in PNG marks a century of glory and globalisation.
Back in December of 2022, Prime Minister Marape met with the bank’s officials and welcomed their plans to extend their representative office license, which they obtained from the Bank of Papua New Guinea (BPNG).
The Bank of China operates in 60 countries around the world and is the world’s fourth biggest banking group with a diverse portfolio of investments.
As the most international and diversified bank in China, Bank of China provides a comprehensive range of financial services to customers across the Chinese mainland, Hong Kong, Macau, Taiwan and 31 overseas countries and regions with about 400,000 employees worldwide.
The Bank's presence in PNG may expand into retail banking later on, but for now their representative office is located in Port Moresby.
Furthermore, Bank of China's plans to expand to other provinces could further increase its reach and influence in the market. As a result, other commercial banks in PNG may need to reassess their strategies and offerings to remain competitive in the face of this new entrant.
Bank of PNG's Stance: Meanwhile, the Bank of China's decision to open a representative office instead of a fully-fledged bank is new to the country and the South Pacific region, according to the Bank of PNG (BPNG).
After the inaugural launch, BPNG's acting governor Elizabeth Genia said the approval term for a banking licence was for three years.
"BPNG looks forward to the Bank of China choosing to apply for a banking licence at the end of that approval term, but opening a representative office does not translate into conducting banking and financial transactions" she said.
However, BPNG recognizes that having a representative office would make a positive contribution towards our mutual trade, investments, cross-border banking services and other opportunities, such as correspondent banking relationships for domestic banks.
Genia said having another participant in the market would improve competition, increase efficiency and lower the cost of funds, particularly in the context of fees and charges.
The Central Bank is confident that expanding the financial services sector will contribute to employment and economic growth and the recent opening of the Bank of China’s representative office will certainly expand the financial services sector here in the country.
The new competitor in the banking sector is looking to raise the bar on customer expectations. Both individual and organizational customers now will seek a long list of attributes from their financial-service providers to compare with BoC's impact when it demonstrates its dominance within the market in coming years.
References:
1) Bank of China's Inaugural Launching of International Representative Office (PNG) Thursday 1st June, 2023 at the Stanley Hotel in Port Moresby [Paul Oeka/PNG Business News]
2) Bank of China launches representative office in PNG Xinhua. https://english.news.cn › asiapacific
3) Bank of Papua New Guinea https://www.bankpng.gov.pg › media Releases | Bank of Papua New Guinea (PNG) Port Moresby
