Mozambican banks try to gain market in Chinese companies – Economist

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Mozambican banks try to gain market in Chinese companies – Economist

11:10 CAT | 29 Jun 2017

The Economist Intelligence Unit (EIU) believes that financial sector readjustment and restrictions on Chinese monetary policy will influence business activity in Mozambique despite the efforts of Mozambican banks to attract these companies.

“With domestic demand for financial services in Mozambique shrinking because of financial illiteracy and the informal nature of the economy, shifting efforts to Chinese firms may provide national banks an opportunity for expansion,” write the experts of the economic analysis unit of the British magazine The Economist.

However, they add: “We doubt that Chinese companies will rely heavily on domestic banks when they operate in Mozambique, mainly because they can generally access better business and services in China.”

In a note sent to investors on the efforts of the Mozambican banking sector to attract more Chinese business customers which Lusa has access to, the analysts note that despite these constraints, “the strong readjustment under perspective in the Chinese financial sector and the tightening monetary conditions from 2018 onwards are expected to influence the pace of expansion of Chinese enterprises in Mozambique”.

Citing the Portuguese-owned Millennium bim bank, the largest in Mozambique in terms of market share, which earlier this month announced an external currency exchange service for Chinese companies, the EIU says that this is a market trend followed by other banks such as Standard Bank and Société Générale.

“This trend in the banking sector to improve its offering to Chinese companies reflects the fact that its commercial presence is growing,” the EIU points out, mentioning the US$6 billion (EUR 5.2 billion) deal in liquefied natural gas projects, in which the Chinese state oil company has a 20 percent share, and the US$1.4 billion railroad, an undertaking in which China National Complete Engineering has 50 percent.

“Mozambique’s financial sector is too small to offer credit to these megaprojects, but banks are probably hoping that these large enterprises will encourage other Chinese private firms to expand their presence in the country,” the EIU says.