Bank of China Ltd.'s plans to open a branch in Greece by end 2019 are a "vote of confidence" in the Greek recovery and underscore the importance of the economic relations between the countries, according to analysts.
The state-owned bank is one of China's "big four" with assets of $3.242 trillion as of June 30, 2019, according to S&P Global Market Intelligence data. While the news of its plans is welcome, recent announcements by Chinese banks about setting up shop in Greece have not always translated into action.
Greek Foreign Minister Nikos Dendias, who recently met with Bank of China's head of European operations, Zhou Li Hong, said that the executive had told him of plans to launch a branch in Greece, according to an Aug. 22 report from Reuters.
"In principle, having a Bank of China branch here by the end of the year may be seen as a 'vote of confidence' in Greece's economy now that it's crawling out of a decadelong slump," Plamen Tonchev, head of the Asia Unit at the Institute for International Economic Relations in Athens, said in an interview.
Open for business
Greece was plunged into a government debt crisis and prolonged recession in the aftermath of the 2009 global financial crisis, but the country's economy has since come back from the brink of collapse, and Greece exited its €260 billion-plus bailout from its eurozone partners and the IMF in August 2018. Economic growth is slowly returning, with GDP growing 1.3% year on year in the first quarter of 2019.
There has also been a surge of interest from Chinese investors in the past few years, particularly in the real estate market. The Golden Visa scheme, which gives permanent residency to non-EU nationals and their families investing €250,000 or more in real estate, has seen particularly enthusiastic uptake from Chinese buyers. Chinese nationals accounted for 2,416 out of the 3,620 "Golden Visa" permits given by the Greek government between the scheme's inception in 2013 and April 2018.
"It shows that the Chinese remain open to doing business in Greece, and setting up a branch signals that they are there for the long-term, Jonas Floriani, director at AXIA Ventures Group in London. The move, however, is unlikely to have any particular impact on Greece's four biggest banks — Piraeus Bank SA, National Bank of Greece SA, Alpha Bank AE and Eurobank Ergasias SA — since the branch is likely to focus specifically on Chinese companies and citizens in Greece.
Alex Boulougouris, co-head of research at Wood & Company, agreed that the opening of Bank of China branch in Greece would not have any obvious impact on the "big four" and was "good news" for the Greek economy overall. It also appeared to be linked to growing Chinese interests in the country such as COSCO SHIPPING Holdings Co. Ltd.'s ownership of the Port of Piraeus, the main sea port of Athens, he said.
At the moment, the Greek government is "actively lobbying" for foreign direct investment, but is generally less interested in getting loans from overseas, Tonchev said. Having said that, Bank of China may be looking to lend to Greek shipping companies because of their close links with China, he said.
The Chinese have already been active in lending to Greek shipowners over the past decade, with the then-Premier Wen Jiabao announcing a lending facility to Greek shipping companies in 2010 during a state visit to Greece.
Wen pledged $5 billion in loans to the Greek shipping industry in 2010, at a time when the global shipping industry was facing a wave of bankruptcies as trade slowed and funding dried up.
Reserving judgement
But it may be worth reserving judgement about Bank of China's Greek plans until there is some more concrete development, Tonchev said. Two other Chinese lenders have signaled their intention to make inroads into the Greek market over the past year and it is not clear what has become of those ambitions, he said. Industrial & Commercial Bank of China Ltd. was understood to be on the cusp of getting a Greek banking license in mid-2018, but there has been no news on this front for over a year now, Tonchev said.
China Development Bank has also been "very active" in signing MoUs in Greece in recent years, even signing one with the Bank of Greece SA, the Greek central bank, in 2017, he said. CBD had also said that it was interested in lending to companies looking to invest in lignite (coal) power plants that the Greek Public Power Corporation was looking to sell off, he said. It does not seem that anything came of these agreements, especially after several rounds of auctions held by the PPC to get rid of the power plants have failed, he added.
The most recent PPC plant auction in July this year failed to attract any bids, according to local media reports.
Tonchev said that CDB's way of operating in Greece appears to be to sign the maximum number of MoUs possible, labeling them as part of China's Belt and Road Initiative, the Chinese government's global strategic infrastructure development plan.
"To what extent these MoUs translate into projects on the ground is something you'll never read about in the Chinese media...So, let's see what comes out of the Bank of China's presence. I suspect we'll know more by the end of the year," Tonchev said.
