China’s Banks To Require More Office Space In Hong Kong And Singapore

Since the beginning of the millennium, mainland enterprises have been encouraged to invest overseas by the Chinese central government under its “Going Out” policy as part of the government’s strategy to internationalise its economy.

The pace of “going out” has been gathering momentum in the past five years, as reflected in the growing usage of the Chinese yuan in both trade finance and investments. As a result, Hong Kong and Singapore have already commanded the top two positions as the largest offshore RMB clearing centers in the world.

In the paper “The footprint of Chinese banks in Hong Kong”, global real estate and services firm Colliers, has analyses the office requirements of the Chinese banks in Hong Kong and Singapore.

The report found that there is a significant difference in the real-estate requirements for Chinese banks in Hong Kong and Singapore. Currently, there are eleven Chinese banks licensed to operate in Hong Kong that occupy a total of around 780,000 sq ft while Singapore currently hosts about seven banks that were originally incorporated in China, occupying around 160,000 sq ft.

For the mid-sized banks, the common practice is to set up a local representative office in Hong Kong, generally leasing around 2,000 to 3,000 sq ft as a start and later expanding their space as much as ten-fold in Grade A buildings in Central and Admiralty.

In Singapore, Chinese banks have been setting up their presence largely due to the island nation being the center for commodity trading and foreign exchange and also the location of choice for global multi-national corporations doing business in Southeast Asia.

Chinese banks will continue to expand internationally, thanks to the “Going Out” policy and the latest Qualified Domestic Individual Investor (QDII2) programme,” Simon Lo, Executive Director of Asia Research & Advisory explained, “assuming a second batch of 15 mid-sized commercial banks in China to set up their full offices in the next five years, the impact on Central Hong Kong alone will be a new demand of 450,000 sq ft.”

Rent for Grade A office in Central has increased by 10% as of August 2015. Colliers predicts a 15% increase for the whole of 2015.

 

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