Banking

Wells Fargo to seek license for yuan-based business

By Gao Changxin (China Daily)
Updated: 2011-04-19 13:10

SHANGHAI - Wells Fargo & Co said it will apply for a license to conduct yuan business in China, as it sees great business opportunity in the booming yuan-denominated trade.

The fourth-biggest bank in the United States by assets, Wells Fargo currently has a 450-person team in Hong Kong that processes 10 percent of Hong Kong's total exports, of which a significant portion is from the Chinese mainland.

The bank is the biggest trade processing outsourcer in Hong Kong, processing trade for more than 100 financial institutions and other corporate clients.

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"As the internationalization of the yuan continues at a very rapid rate, we clearly see that there is going to be more and more demand for yuan capabilities," Richard Yorke, executive vice-president and head of international group, said on Thursday in Shanghai.

"So it is important for us to make sure that we get a yuan license and we are able to provide those services which are going to be in demand from our customers," he said.

The volume of yuan-denominated trade swelled after the central government started a pilot program in July 2009 and expanded it in 2010. And Hong Kong has since quickly risen into a major offshore market for the yuan.

According to data from HSBC Holdings plc, the average monthly volume of yuan-settled trade surged from 600 million yuan ($92 million) in 2009 to 68 billion yuan in the June-to-November period in 2010.

Qu Hongbin, HSBC's chief economist for China, has forecast that one-third of China's cross-border trade may be settled in yuan by 2016.

Yorke said Wells Fargo's advantage in trade processing will be built through its big corporate client base in the US, which is increasingly looking to do business in China and has an increasing demand for yuan.

Up to 85 to 90 percent of the big companies and one-third of mid-market companies in the US are Wells Fargo's clients, according to Yorke.

However, Wells Fargo's strategy in China will just focus on trade settlement and supporting its US clients' needs internationally, said David Hoyt, senior executive vice-president and head of wholesale banking.

He said the bank has no plans to run other businesses in China, such as retail banking, a traditionally strong area for Wells Fargo in the US.

Wells Fargo currently has a branch in Shanghai with 60 employees and a seven-person representative office in Beijing.

That is a relatively small presence compared with other big foreign banks, such as UBS AG, which employs around 500, but Hoyt said Wells Fargo has no plan for expansion on the Chinese mainland.

"We are comfortable with having a branch in Shanghai and a rep office in Beijing. We really think we can execute our strategy without adding additional branch offices," he said.

Wells Fargo also has no immediate plan to set up a joint venture or a locally incorporated bank in China.