A letter has recently come to light which appears to question the UK's financial services watchdog, the Financial Services Authority (FSA), unevenness in applying regulatory standards. The letter appears to have been drafted on behalf of several of China's biggest banks and voices concerns about unfair treatment as they aim to expand in London and across Europe.

Chinese companies across most industries are expanding into Europe and the US, and banking is no different. But this letter of complaint does raise the issue of the geographical route such expansion could follow.

The FSA's refusal to allow China's banks to open some branches appears to be the root of their discontent, and has resulted in the beginnings of an exit strategy out of London and into other lighter regulated countries in Europe such as Luxembourg.

But is this such a bad move? Or is it in actual fact a blessing in disguise which will lead to China's banks occupying key markets right in the geographical center of Europe?

London, or rather the square mile located in the eastern center of London often simply referred to as "the City," has long been associated with banking and financial services.

Indeed, the City remains a global banking center. Crucially, though, the undoubted historical importance of London's banking association should not be confused with major changes in the balance of power across Europe.

Not only is the influence of London weakening, even within the banking sector, but it is those countries at the geographical heart of Europe and the eurozone that are moving toward greater and greater economic and political cohesion.

It is advantageous for China's banks and, for that matter, Chinese companies from all industrial sectors to form a solid base within this area. Such a base will enable far more effective expansion across Europe.

Such a base at the heart of Europe will also allow for greater strategic control and management of overall European operations. London is a city increasingly isolated from the rest of Europe.

China's banks, by moving from London to Luxembourg, have perhaps inadvertently paved the way for speedier and deeper penetration into the European banking market.

Cultural engagement and acceptance is more likely when operating inside those countries at the heart of mainland Europe, such as the Benelux counties, France and Germany, where there is a history of rapprochement and openness to different national and corporate cultures.

London, especially the City, remains entrenched in the past with a pervasive culture characterized by arrogance and ethnocentrism.

China's banks are set for successful international expansion no matter what, and all the FSA has done is hastening this expansion by forcing a move to the centre of Europe.

The UK government, which recently publicly announced the aim of making London a global center for yuan trading, should take this seriously and work with the FSA in order to adopt and implement a more engaging and even regulatory approach.



The author is a visiting professor at the Beijing-based University of International Business and Economics and researcher at Nottingham University's School of Contemporary Chinese Studies. opinion@globaltimes.com.cn