DBS China President Cheng Sze Ching: Deepening the Chinese market and injecting financial momentum into the cultivation of new quality productivity

This year marks the fifth anniversary of the establishment of the Shanghai-Singapore Comprehensive Cooperation Council. In the second half of the year, the fifth meeting of the Shanghai-Singapore Council will be held in Shanghai.

For a long time, China and Singapore have been friendly neighbors separated by a strip of water. In 2023, China-New Zealand relations will be upgraded to an all-round, high-quality and forward-looking partnership, and the practical cooperation between the two sides in various fields will continue to show new vibe, new vitality and new vitality.

As the largest commercial bank in Singapore and Southeast Asia, DBS has been present in China for more than 30 years. During this period, it has not only witnessed the rapid growth of China's economy, but also deeply participated in and benefited from the expansion and opening up of China's financial market.

"We have positioned ourselves to deeply cultivate China's financial market, and coordinate the group's inter-regional networks and resources to provide financial support for the development of new quality productivity." Recently, DBS China President Zheng Sizhen said in an exclusive interview with the reporter of International Finance News.

A third of 2024 has passed, and DBS has raised its forecast for China's economic growth this year to 5% from 4.5% previously. Zheng Sizhen said frankly that he is very optimistic about the development prospects of China's economy, especially considering that foreign trade rebounded in the first quarter and the scale of imports and exports hit a record high, which will inject strong impetus into the steady growth of the economy throughout the year.

Continue to increase investment in China

In 2021, DBS Bank, as a newly introduced overseas strategic investor, subscribed for a 13% stake in Shenzhen Rural Commercial Bank for RMB5.286 billion, becoming the bank's largest shareholder.

Two years later, at the end of 2023, DBS Bank increased its stake in Shenzhen Rural Commercial Bank from 13% to 16.69%, further consolidating its position as the largest shareholder.

Zheng Sizhen revealed that so far, DBS Bank has invested more than 7 billion yuan in Shenzhen Rural Commercial Bank. On the one hand, this is due to the continuous deepening of China's financial opening-up, and on the other hand, it is also based on the expectation that the cooperation between the two sides can bring synergies.

According to public information, Shenzhen Rural Commercial Bank was established in 2005 and is a joint-stock rural commercial bank restructured on the basis of the former Shenzhen Rural Credit Cooperatives Association and its 18 rural credit cooperatives, and is also the only local local corporate bank in Shenzhen.

If the big banks are the main arteries for the flow of financial resources, then the rural commercial banks are the capillaries. They sink into the community, deeply cultivate micro, small and medium-sized enterprises, have an in-depth understanding of the local market and a wide customer base.

Such positioning will undoubtedly play a complementary role for DBS Bank, which aims to be "tall" as its customer. With equity investment as a link, DBS will be able to leverage the local network and resource endowment of Shenzhen Rural Commercial Bank to enhance its brand influence and market penetration, and accelerate its strategic layout in the Greater Bay Area.

It is worth mentioning that taking advantage of the cross-boundary wealth management connect, Shenzhen Rural Commercial Bank has been successfully approved to cooperate with DBS Bank (Hong Kong) to launch the "Southbound Scheme" business, providing qualified GBA investors with a wide range of investment products, solutions and digital banking services.

"We have seen that in the past two years, the number of customers and the scale of business introduced by Shenzhen Rural Commercial Bank to DBS Bank through the Cross-boundary Wealth Management Connect are very impressive." Zheng Sizhen said.

The Greater Bay Area (GBA) is one of the key areas of China-Singapore cooperation in the future. In June 2023, DBS established the bank's third global technology R&D centre in the Sino-Singapore Guangzhou Knowledge City, focusing on nurturing local professionals in areas such as artificial intelligence, blockchain and 5G, and developing more fintech innovation solutions.

Zheng Sizhen emphasized that the R&D center is not only for China, but for the entire group. Prior to this, DBS already had two R&D centres in Singapore and India. The reason for the location in Guangzhou is not only to grasp the growth opportunities that continue to be released by the Greater Bay Area and accelerate the construction of the digital bay area, but also to further demonstrate the Group's unwavering confidence and determination to invest in China.

Empower new quality productivity

Since the beginning of this year, "new quality productivity" has quickly become a hot word, not only written into the government work report for the first time, "vigorously promote the construction of a modern system, accelerate the development of new quality productivity" has also been listed as the first of the top ten tasks of government work in 2024.

Where is the "new" in the new quality of productivity? It is characterized by innovation, the key is high quality, and the essence is advanced productivity. Behind this is inseparable from the continuous support of financial "living water".

According to Cheng, DBS China has set up a dedicated team to serve the new economy at its head office, providing full-life cycle financial services for science and technology enterprises in different sectors and at different stages through cross-departmental and cross-regional cooperation.

In order to seek greater development space and market share, more and more science and technology enterprises are looking to overseas markets. Among them, Southeast Asia, as an emerging market, has naturally become a must for enterprises to go overseas.

On the one hand, DBS leverages its network in Southeast Asia and ASEAN to provide one-stop financial services including account opening, cash management, foreign exchange trading, venture capital, equity financing, etc. On the other hand, it has achieved business synergy with DBS Securities, relying on the professional capabilities of the investment banking teams in Singapore and Hong Kong to provide service solutions for enterprises to explore listing in Singapore, Hong Kong and other places.

It should be emphasized that the digital transformation of the banking industry itself is also an important part of the development of new quality productivity. "In 2024, we will embrace AI (artificial intelligence)." Zheng Sizhen admits that generative artificial intelligence (Gen AI) is the future of the whole world and will reshape the rules of the game in all walks of life.

Therefore, in the next step, DBS plans to launch two Gen AI tools in China, mainly to serve internal employees to improve work efficiency and work experience.

First, in terms of corporate and institutional banking, DBS will use artificial intelligence to sort out and refine corporate annual reports. For example, for the green credit business, Gen AI can automatically capture the key information about ESG (environmental, social and corporate governance) in the annual report, and help account managers conduct in-depth analysis and evaluation of the company's sustainability ability on this basis.

Second, referring to ChatGPT, DBS has launched "DBS-GPT", which will also be promoted in China this year. The tool centralizes important textual materials such as internal documents, policy documents, and key process descriptions into the corporate knowledge base. With this platform, employees can quickly locate the information they need through Q&A interactions, and perform content creation and writing tasks in a secure environment.

The internationalization of the renminbi welcomes the time window

After the issuance volume hit a record high last year, in the first quarter of 2024, panda bonds once again ushered in a "good start". According to Bloomberg data, as of the end of the first quarter, the scale of panda bonds issued by overseas institutions reached 67.4 billion yuan, a year-on-year increase of 220.95%.

Panda bonds, named after mainland national treasures, refer to RMB bonds issued in China by overseas and multilateral financial institutions.

In March this year, DBS China, as one of the members of the underwriting syndicate, assisted a subsidiary of CapitaLand, a Singapore-based real estate asset manager, in issuing the first sustainability-linked panda bond of RMB1 billion in the interbank bond market. This is the first sustainability-linked panda bond issued by a Singaporean company, and the first panda bond issued by an ASEAN company since the Regional Comprehensive Economic Partnership (RCEP) came into full effect.

Behind the continuous refresh of panda bonds, it reflects that the attractiveness of the renminbi as a financing currency is continuing to increase. The reason for this is that Zheng Sizhen believes that the current interest rate differential between the RMB and the US dollar has created favorable market conditions for promoting the internationalization of the RMB.

In the past, when the US dollar was low in interest rates, most international companies preferred to issue US dollar bonds and then convert the funds into RMB to inject capital into their branches in China. But now, due to the high interest rate of the US dollar, these international companies are more keen to issue RMB bonds directly to meet their financing needs, considering multiple factors such as costs.

Of course, in addition to being increasingly used for bond issuance and financing, the renminbi is also beginning to play a more important role in international trade settlement.

In the ASEAN region, Indonesia has a large population and abundant natural resources, making it very attractive for Chinese companies. Since 2001, the country has implemented a managed floating exchange rate system for the Indonesian rupiah, which only allows the Indonesian rupiah to be freely convertible with major currencies such as the US dollar and the euro.

In September 2021, the People's Bank of China and Bank Indonesia officially launched the China-Indonesia Local Currency Settlement Cooperation Framework (LCS). Under this framework, Chinese and Indonesian companies can conduct direct exchange transactions between RMB and Indonesian rupiah through designated Chartered Cross-Currency Market Maker (ACCD) banks. Subsequently, DBS China and DBS Indonesia were approved as ACCD banks respectively.

In February this year, DBS China successfully completed the cross-border collection of Indonesian rupiah for a GBA company with roots in the Indonesian market, and entered into a RMB/IDR exchange business with it. The resulting FX position, DBS China, has also flattened in the RMB/IDR regional market.

In fact, as one of the first batch of banks directly participating in the Cross-border RMB Payment System (CIPS), DBS has been committed to building financial bridges to enhance the ability of cross-border RMB business to serve the real economy and promote high-quality development.

Being in the midst of it, Zheng Sizhen deeply felt that in the past two or three years, the international style of the RMB has become stronger and stronger. She suggested that it is more important to seize the time window of the inversion of the interest rate differential between China and the United States to solidly promote the wide application of the renminbi in international trade and financial transactions.