Chinese Character

The people’s banker

The man who brought consumer banking to China departs CMB

Ma Weihua w

Stepping down: arguably one of China’s most influential bankers, Ma Weihua has just retired

China Merchants Group has always been a difficult organisation to pigeonhole within Beijing’s complex hierarchy of state-driven business empires.

In 1981 Jiang Zemin – later Chinese president, but then vice minister of the state import and export commission – outlined the special nature of the firm: “The Merchants Group has been given such autonomy that, instead of having to abide by the current administrative system and submit applications and petitions to layer upon layer of higher authorities, they make their own decisions… They do everything by following economic laws.”

Merchants Group – founded during the Qing dynasty but then part of the Ministry of Transport and Communications – was given this unusual degree of “autonomy” to run the Shekou Industrial Zone in Shenzhen. Unlike most state firms of that era, the Group’s mentality was more entrepreneurial. After all, its task was to attract money from neighbouring Hong Kong and create a free market enclave to pioneer the reforms launched by Deng Xiaoping.

As it pursued this mission, one of the Group’s decisions would have far-reaching consequences for the banking system. It created the innocuous-sounding Shekou Industrial Zone Settlement Centre, which in 1987 was renamed China Merchants Bank (CMB).

From its small roots as a Shenzhen-headquartered financier, CMB would grow into China’s sixth largest bank. It would also become the reform era’s first commercial bank with multiple shareholders – a bold initiative at a time when all financial institutions were state-owned and behaved more like arms of government.

CMB was in the news again this month with the announcement that its long term boss Ma Weihua is retiring. Shanghai Securities News described Ma – who ran CMB for 14 years – as the “heart and soul” of the bank. And while some media fretted about the suddenness of the announcement, the 21CN Business Herald was more sanguine: “With his mission accomplished, Ma is making the perfect curtain call.”

Ma presided over a period of phenomenal innovation, growth and reform at the bank. When he took over, CMB had assets of Rmb151 billion ($24.6 billion) and had announced a profit of Rmb2 billion. But as he departs, profits have surged to Rmb45.2 billion, with assets reaching Rm3.4 trillion. During his tenure, many of the innovations in Chinese consumer banking started out with CMB. “Ma has a unique vision for the development of the banking sector,” 21CN adds.

Few would have guessed early on that Ma would become one of the giants of modern Chinese banking. Born in 1949 in Jinzhou in northeastern China, he spent his early years on a farm before landing a minor job with the railway bureau. After higher education was resurrected – following the chaos of the Cultural Revolution – Ma was accepted to Jilin University. He was almost 30 when he matriculated, graduating with a degree in Management of the National Economy. He then went to work for Liaoning’s provincial planning commission and got a lucky break when he became a protege of the Party secretary Li Guixian. When Li was transferred to run Anhui province, he took Ma with him. When Li climbed further up the career ladder to become a governor of the central bank in 1988, he again brought along Ma.

At almost 40 Ma’s financial career began. He spent just four years in Beijing, before being posted to Hainan Island as the governor and Party secretary of the central bank’s branch there. These were far from dull times: Hainan had been selected to pilot a number of economic reforms and had become a magnet for a new class of Chinese entrepreneurs. Ma was witness to a property boom and the subsequent financial impact when it burst (an experience that would make him cautious of real estate bubbles in later years).

Then in 1999, the 50 year-old was named as CMB’s new chief, replacing Wang Shizhen who had held the role since the bank’s founding.

As local magazine The Banker puts it “Ma was now entering the golden age of his career”.

It may not have seemed that way to Ma at the time. Almost as soon as he took office, he had to deal with a run on CMB’s Shenyang branch. Fortunately, Ma had handled a similar situation in his former post, when there was a crisis of confidence in Hainan Development Bank. This time Ma swiftly dispatched additional funds to Shenyang and ordered that the branch be kept open around the clock, as a show of confidence. It worked, defusing the crisis.

For the new CEO, the next challenge was greater: figuring out a means to differentiate CMB from the much larger state rivals that dominated corporate lending.

His solution? CMB gradually shifted its focus to consumer banking. Ma told local branch managers that retail banking represented the future. “The retail business, at the beginning, is very small,” he said. “But soon it will see exponential growth. Consumer banking emphasises accumulation. The longer it develops, the more stable it is.”

As The Banker also points out, this required introducing a new service culture at CMB. The magazine comments: “Ma was the first banker in China to propose and personally advocate that banks should be customer-oriented.” That may not seem a radical strategy but a decade ago banks in China typically offered a menu of outdated products to retail customers, delivered with shoddy service from beaten-up branches.

Instead Ma intended to make CMB the bank of choice for newly affluent Chinese. Branches were overhauled and staff instructed to project a young and professional brand image. CMB’s advertisements focused on clients being assisted by smartly dressed, helpful staff (Ma even instructed some of his middle management to wear Armani suits, The Banker magazine recalls).

In product development, there were a series of innovations. First there was its credit card, the first to be swipeable nationwide (previously, banks issued cards that could only be used in the city of issue). That got the attention of China’s business folk, as did CMB’s next move: allowing customers to use their credit cards abroad but pay off their bills in renminbi.

For China’s well-heeled elite – making increasing numbers of trips overseas – this was the must-have card.

Under Ma these types of people were targeted. In an example of one of CMB’s more pioneering marketing moves, it co-financed the hit movie If You Are the One in 2009. Cue lots of close ups of the film’s wealthy protagonist handing over his CMB credit card (see WiC10), in this case a newly launched ‘No Limit Card’ with no maximum spend. This invitation-only product was (again) a first in China, coming with a Rmb10,000 annual service fee and a concierge service to help with the likes of dining reservations (notably, CMB was also the first to launch a private banking service for retail customers).

Two further product innovations brought in more business. The first was in the mortgage market, where CMB started to compete by offering better rates than competitors. The second was its internet banking service, the first online offering. Moving first brought advantages, says The Banker: “At the mention of online banking, people naturally think of CMB; at the mention of CMB, people naturally think of online banking.”

CMB now generates a third of its profit from consumer banking, the highest proportion of any bank in China, and Ma’s management team has tried to stay ahead of its rivals in winning new business. As one staffer told the media: “Ma is very energetic and his ideas always keep up with the times. Despite his old age, he often studies young peoples’ spending habits and financial needs, and then requires the bank to keep up with the market to innovate.”

An example: seeing the popularity of smartphones, Ma signed a cooperation agreement last year with handset-makers and the telcos China Mobile and China Unicom. The idea is to embed a CMB credit card in phones, so that their owners can use them for online payments or wave them next to shop terminals to pay for items. “Those who do not develop this will lose a lot of customers in the future,” Ma predicts.

In fact, 21CN says Ma focuses relentlessly on CMB’s competitive position, frequently telling his middle management that they must stay ahead of their peers – particularly Minsheng Bank – and warning that they must be motivated by “a sense of crisis”.

But aside from instilling the requisite sense of paranoia in his staff, Ma believes his greatest achievement at CMB has been to foster an “innovation culture”.

“How has that culture come into being?” he asks rhetorically. “Because from its birth CMB has been the product of the reform era. With neither government investment nor preferential government support, CMB had to grow up on its own.” (CMB is still 18%-owned by China Merchants Group, but has always had the status of a non-state banking institution thanks to its more diverse shareholding.)

The bank’s rapid growth has mostly been of the organic variety and it now has branches in 110 Chinese cities. However, it gained overseas exposure by acquiring Hong Kong-based Wing Lung Bank in 2008 (a deal for which Ma was criticised at the time as too expensive but which management justifies today with Wing Lung’s return on equity – an average of 13.28% since the acquisition).

Prior to his retirement, Ma had called for a fresh wave of product innovation. He said CMB must prepare for interest rate liberalisation and said the bank had to get better at pricing loans for small and medium-sized businesses.

These challenges will be left to his successor, the 47 year-old Tian Huiyu, a US-educated banker who joins from China Construction Bank (CCB). In a connection that bodes well for CMB, Tian is thought to be close to Politburo Standing Committee member Wang Qishan, having served as his secretary when Wang ran CCB himself in the 1990s.

As the third boss of CMB, Tian will know that the organisation tends not to churn through its chief executives (the first two had 12 and 14 years in their jobs respectively). But there will be pressure, not least to fill the boots of his predecessor. “Ma has almost become synonomous with CMB,” says 21CN.

Yet Ma’s greatest legacy goes beyond his own institution. Indeed, thanks to his efforts at CMB personal banking standards have risen throughout the industry, and other major players have devoted resources to growing in the area. For example, ICBC now has 77 million credit cards outstanding – with Rmb1.3 trillion spent using them last year. By comparison, CMB has 43 million credit cards (on which Rmb657 billion was spent in 2012).

Those numbers are indicative: ICBC is now the biggest player in retail banking. Then again 21CN still reckons that CMB remains the best consumer bank in China.


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