China sets sights on Islamic finance

China sets sights on Islamic finance

CHINA, the new economic powerhouse and one of the world’s fastest growing economies, has set its sights on Islamic banking and finance.

The US$3.43 trillion (RM11.11 trillion) economy plans to woo Islamic banking and finance institutions to the country by establishing an Islamic finance hub.

Islamic finance, with global assets worth over US$1 trillion (RM3.24 trillion), is now among the fastest growing sectors in international finance.

Shenyang, the largest city in northeast China, has started the ball rolling by seeking Malaysia’s expertise in Islamic banking and finance to help establish an Islamic finance centre in the region.

If the plan materialises, Shenyang will become the first Islamic banking and financial hub in the country of 1.3 billion people.

The plan to establish Islamic finance centre would complement Shenyang Finance Development Target 2010.

Under the target, Shenyang, which is the capital city of Liaoning province, will be developed into a regional finance centre that houses financial institutions, financial markets, advanced financial facilities and efficient financial services by 2010.

With a population of 7.2 million and relatively high income per capita, Shenyang itself provides a ready market for Islamic banking and finance products.

Shenyang, which was the capital of China until the relocation of the capital to Beijing after the fall of Ming dynasty, is now the base for equipment and manufacturing industry.

Islamic Banking and Finance Institute (IBFIM) managing director and chief executive officer Datuk Dr Adnan Alias said if the Chinese community in Malaysia adopts Islamic financial products, imagine the market in China if the people there become aware of the products.

“After all, the Chinese are known to be rational consumers, especially in the financial sector,” he said.

On January 29, the Shenyang authority inked a memorandum of collaboration with its Malaysian partners, IBFIM and the Kuala Lumpur Chinese Assembly Hall (KLCAH).

Under the agreement, IBFIM will work with KLCAH to provide the Shenyang authority with syariah advisory and consultancy services and training in Islamic banking and finance.

They will also provide education to Shenyang’s people and the authority on the awareness of Islamic finance as well as the significance of Islamic finance to the society and business.

IBFIM will also conduct various domestic and international training and development programmes on Islamic banking, takaful and Islamic capital markets.

Adnan said currently, there are no Islamic banks in Shenyang and this is the first time the authority is collaborating with any party on Islamic finance.

Director of administrative committee of Shenyang Finance and Trade Development Zone’s investment bureau, Yin Hongwu, said initially the Islamic banking and finance products would be targeted at over 100,000 Muslims in northeast China.

Later, it would be spread to the 100 million people in northern China.

He said the Shenyang authority has no targeted time frame for the establishment of an Islamic finance hub in the city or the targeted size of investment that it expects to attract in the Islamic finance sector.

“It is in the planning stage,” he said.

The introduction of Islamic banking and finance products to Shenyang is expected to benefit the industrial players and complement the conventional banking and financial products there.

Among the industries in Shenyang include mechanical processing, metallurgy, chemical industry, medicine, light textile, electron, car, aviation and construction materials.

Currently, Shenyang has 59 financial institutions including 25 banks, 25 insurance firms, seven securities branch agencies, two futures agencies, with more than 40,000 practitioners engaging in finance.

Since the opening-up of financial industry of Shenyang in 2004, nine foreign-funded banks and five wholly foreign-owned insurance companies have set up branches or representative offices in the city.

Elaborating on the collaboration with Shenyang authority, Adnan said IBFIM will help Shenyang authority to set up an Islamic financial community on the allocated 120ha site.

“We have been invited by the Shenyang Province Authority. They will give us a piece of land to conceptualise and develop it into an Islamic financial community complete with commercial and residential entities within the enclave,” he said.

He said IBFIM would submit the proposal for the development of the community in the third quarter of the year.

Meanwhile, KLCAH secretary general Ng Thien Phing told Business Times that three months ago, Shenyang authority has asked KLCAH to look for an adviser to help them establish Islamic banking and finance.

“They plan to set up Islamic banking and financial centre in Shenyang, so they need to understand how Islamic banking works,” he said.

As a start, IFBIM and KLCAH will come out with a series of articles on understanding Islamic finance in Chinese dailies.

Ng said in May this year, a seminar on trade promotion will be held in Kuala Lumpur to introduce Shenyang to potential investors in Islamic banking and finance.

A month later, IBFIM’s Adnan will lead a delegation, comprising bankers and businessmen, to Shenyang to explore the potential in the province.

The delegation is expected to include bankers and businessmen from Middle East.

“They want Malaysia to be a platform to attract Middle Eastern Islamic banking and finance institutions to Shenyang. This is because Malaysia has good relations with Middle East and the country is also the chairman of OIC (Organisation of Islamic Conference),” he said.

Ng said Shenyang has also asked KLCAH to establish relations between the Muslim community there and the Malays in Malaysia.

They also invited Malaysian ministers to visit Shenyang, he added.