The China Merchants Bank (CMB) was singled out by General Electronics (GE) from many powerful competitors all over the world to manage the company's foreign exchange pooling in China. As a matter of fact, GE was not the only one favoring CMB. In 2004 alone, CMB managed to strike strategic partnerships with more than 10 renowned enterprises. More excitingly, what CMB values is not only the considerable profits that these major projects would bring to the bank, but also the precious opportunities they present for the bank to constantly improve the quality of its service and management. -- the editors
A.M., Dec. 29, 2004, Conference Room, CMB Headquarters.
GE's evaluation team was conducting the last round of tele-interview with CMB's bidding group through trans-Pacific video phone. The talk, first scheduled for merely 20 minutes, was prolonged to 90 minutes. This "final grilling" will decide who gets the contract, and work together with GE.
After a 10-minute break that seemed peculiarly long, the other party was on-line again. After analyzing the items that CMB scored relatively low, a GE official suddenly tuned up, "Congratulations! Your bank has been chosen by GE to solely operate our centralized management of foreign exchanges in China."
Amid this competition participated in by all leading banks from China and the rest part of the world, CMB was eventually chosen by GE, "the most critical company," and became the first commercial bank in China to manage foreign exchange pooling operation. This move broke the monopoly of overseas-funded banks in this business, and noticeably exemplified the wisdom and courage of a local bank in China.
Surviving an ordeal longer than five months, this tranquility reflects that kind of peace and calm usually achieved through a treacherous trip of thousands of miles.
CMB: Give up? No way!
On July 15, 2004, GE (China) Co., Ltd. sent bidding invitation to three local banks including the CMB and seven overseas-funded banks for its USD Cash Pooling project. This is the first time for GE to apply its global cash management mode on its USD cash in China through China-based biding invitation to banks across the world.
As the biggest multi-service company in the world, GE has launched 40 operational entities in China since 1979 with a combined investment exceeding 7 billion US dollars. GE reaped annual sales revenue of 2.6 billion dollars from China in 2003, a large proportion of which was assets in the USD. The cash management business of GE over its 40 local subsidiaries is doubtlessly a piece of big cake for both Chinese and overseas banks.
As far as the CMB is concerned, to qualify for the bidding was already not a piece of cake.
Before this, CMB did have some business interactions with GE, but most of them are "trifle" items between their respective subsidiaries. The "Great Empire of GE" is known for being super critical in selecting bank partners, and only those whose name appear in GE's List of Global Partners are entitled to participate in major cooperative projects. Despite of the bank's limited balance of foreign exchange credit quota, the CMB made a prompt decision in February 2004 including itself in the bank consortium that offered 20 billion US dollars to GE as its standby credit quota, which was all in an effort to fight into GE's List of Global Partners. The 100-million-dollar credit quota CMB offered to GE eventually earned the bank an "admission ticket" for the bidding five months later.
However, CMB staff could barely share the joy of being invited before they were shocked by a 30-page bidding questionnaire. "It was more pressing if compared with the appraisal prior to the bank's share floating," said an official who was involved in the whole bidding process.
GE's bidding evaluation was generally recognized as the most comprehensive, most complicated and most scientific one in the industry, but the company only gives 28 days for bidders to response.
The literally unreasonable criteria, however, aroused CMB people's strong will to fight. "If a new company moves in, or a new project is launched, but none of our account managers visit them within three days, it will be regarded as a case of delinquency, not to mention this case when the chance is coming to us by itself." Giving up is the last thing the CMB people will do.
Right on July 15, the CMB management set out immediately with job distributions, and a project team was established, involving staff from the Corporate Dept., International Dept., Planning Departs, Accounting Dept., Inter-bank Dept. and Information Dept. The team also called on two experts from Shanghai Branch. It was a concerted action between the headquarters and the branches.
On August 12, CMB submitted its bidding letter together with an overall frame for foreign exchange management solution.
On September 12, GE head office had the first round of telephone interview with CMB on items listed in the bidding letter. The bank passed smoothly.
On November 8, GE Group's Director for Cash Management, accompanied by senior financial officers from GE's other regional divisions, flew to Shanghai for the second round of interview, this time face-to-face. A GE insider disclosed later that the vigor CMB demonstrated through the telephone interview deeply touched the director for cash management, who himself has dealt with thousands of banks. And this very gentleman handpicked CMB as the first bank for face-to-face interview. CMB Vice President Li Hao personally led the bidding team to Shanghai, and result was not disappointing. The bank, unfortunately, ranked the fourth when this round of evaluation was concluded.
However, on December 29 when the third around of trans-Pacific interview was over, the final decision was really a big surprise: CMB surpassed all its powerful rivals to actually win the bidding.
Behave More Like a Wolf Than Do Overseas Banks
"In terms of size, we cannot match the state-owned banks; in terms of seniority, we are not parallel to century-old firms like Citibank and HSBC. However, we can still win the contest if we have our own characteristics." This was one of the most frequently quoted remarks of CMB Chairman Ma Weihua.
Apparently, CMB's success in GE bidding is a most vivid case to exemplify the saying "Characteristics is competitiveness."
Cash management has been a routine business for giant overseas banks, and CMB is very much inferior if compared with them. State-owned banks, due to their strong background of government support and their assets much greater than that of CMB, are also superior to CMB.
Background and experience were the two reasons accounting for the fourth place CMB earned from the evaluation in November last year.
Interestingly, despite of its low scores, CMB still managed to deeply impress the evaluation group. "Others are saying that overseas banks are wolves, but I think they (CMB) behave more like wolves," an official with GE (China) made this comment in a private situation.
The spirit of teamwork is the most evident feature of wolves. Any one familiar with CMB is aware of its strong capacity in integrated marketing. From top leader at the headquarters to an account manager at a branch; from the first line to backstage support; all inter-connected like a 3-D matrix. "To be honest, it is not quite possible for a prey to escape such a network." The power of teamwork of CMB even looks admirable to GE.
President Ma Weihua met GE's ranking officers on three separate occasions in last 12 months, and his personal glamour has aroused much praise. During their first meeting, a ranking officer of GE frankly stated his worry, "GE is looking for a bank that is able to build a 220-steory building, but CMB only has the experience to build a 44-steory building. How can you qualify for the job?" Ma Weihua's response was more direct and frank: if compared with big names in the world financial industry, CMB as a Chinese bank only has the experience to build a 44-stoery building, but "we have the absolute potential to erect a 220-steory building faster, better, and stronger."
Ma Weihua's self confidence might be substantiated by the successful market exploration of CMB's credit card ever since its birth. CMB started from scratch to build its credit card center, and accomplished the project in merely 13 months, but it usually takes three to five years in advanced western banks. CMB issued 600,000 credit cards in the first year of service, a new record for Asia-Pacific region to date still awaiting challenges from other card issuing banks. After that, GE Financial Director Miss Cassidy described CMB as follows: "It is the smartest bank I've ever seen."
CMB's bidding team did live up to Miss Cassidy's comments, and cashed President Ma's check with their own deeds. They fully utilized the power of teamwork, and mobilized every ounce of resources they could put their hands on. A very professional set of cash management solution featuring major breakthroughs came into being, which "understands GE more than GE understands itself." "To us, zero experience means zero constrain."
CMB's tailor-made solution once again let GE feel its potential, while its ability of smooth communications with the government, its profound understanding of the state policies, and the bank being the first in the country accorded permission by the State Foreign Exchange Regulatory Bureau further impressed GE with its executive power.
Prior to this, no bank (including the overseas ones) has ever engaged in any foreign exchange cash management in China, so permission by pertinent regulatory authority is a must for anyone to offer this service in the country. For this purpose, GE set a special criteria of "Government PR" in its bidding evaluation system.
CMB did not only submit its bidding letter in the first time, but also built a mechanism to contact the State Foreign Regulatory Bureau once every two weeks. CMB's active communication and coordination made it the first bank to convey policy information to GE.
Active participation does not mean sheer catering. When GE required that all banks participating in the bidding agree to finance some of GE's projects not that mature, CMB insisted that all loans need to be examined against strict risk-control criteria, even if the bank will otherwise lose its qualification in the bidding. This rational attitude met unanimous praise from the evaluation group. "We will feel at home to cooperate with a bank that behaves itself."
Related Reports: Win the GE Bidding: Breakthrough of CMB's Strategy
As a matter of fact, GE was not the only one favoring CMB. In 2004 alone, CMB managed to strike strategic partnerships with more than 10 renowned enterprises.
After many round of check and approval, BMW of Germany announced in March 2004 that it has selected CMB as its exclusive financial service provider in China. In June that year, Dong Feng Motors decided to hire CMB as its assets manager, providing all-around RMB cash management service. In December, CMB joined hands with Zhongji Group, providing the latter with a 2.0-billlion-yuan comprehensive credit quota.
What CMB values is not only the considerable profits that these major projects would bring to the bank, but also the precious opportunities they present for the bank to constantly improve the quality of its service and management.
Take the GE USD Cash Pooling Management for instance. Initial estimation shows that in addition to large amounts of US dollar deposit and international transactions, the project alone will bring annual direct revenues of 10 million yuan from the intermediate operations therein. Successful operation of this project will not only help the bank accumulate experiences in foreign exchange management, but also help improve the bank's RMB cash management services.
CMB has been providing RMB cash management service to big names such as TCL Group since 1999, and was among the first batch of banks to start this service in the country. As the winner of GE bidding, CMB will become a pioneer in China to start foreign exchange cash management service.
Cash management service imposes higher requirement on the banks in terms of technological methods, innovative capacity, and management know-how. The ever-growing group corporations in China are badly in need of this service but there are only a few banks capable of this service. At the meantime, CMB management has realized that cash management is essentially an intermediate business to provide value-added service to the clients. It consumes no capital fund of the bank, and fits precisely into the bank's future strategy to boost business with low capital fund consumption.