Chinese Interest in Islamic Banking

By Lahem al Nasser

Riyadh, Asharq Al-Awsat- We will not be able to say that Islamic banking has become a strong competitor to conventional banking unless it is able to surmount the Great Wall of China and settle upon the Chinese mainland and take advantage of what is considered to be one of the world's fastest growing economies. According to the World Bank, the Chinese economy is expected to experience a growth of 6.5 percent –during the [global] financial crisis – while during the same period of time the World Bank expects world growth not to exceed 1.5 percent. China is considered to be the US's largest creditor, and its investment in US bonds exceed one trillion dollars, while its own monetary reserve stands at nearly two trillion dollars, according to the CNN Arabic website. A Price Waterhouse report predicted that by 2050 the Chinese economy would surpass the [combined] economy of the G7 countries. The report based its prediction on Chinese purchasing power, which is founded upon the savings culture that is prevalent among the Chinese population, and their aversion to debt. China is also considered to be one of the more attractive countries for foreign investment which helps to finance this rapid growth. By the end of 2007 foreign investment in China reached approximately $74 billion.

According to Western estimates, China has a Muslim minority in the Xinjiang province with a population between 70 and 90 million. Yet until today, Islamic banking has confined itself to standing on the Chinese borders [and looking in]. Islamic Banking has a presence in Singapore – a country which borders China – as well as Hong Kong – the island under Chinese control – but has not crossed onto mainland China. To be honest I cannot find any justification to the long delay of Islamic Banking in making this crossing, especially since the Chinese government has been making overtures to this industry. This can be seen with regards to the People's Bank of China gaining membership to the Islamic Financial Services Board [IFSB]. The IFSB – whose premises are in the Malaysian capital Kuala Lumpur - is an international body concerned with promoting, strengthening, and developing standards of Islamic financial services.

China – from time to time- has sent positive messages to the Islamic banking industry; this includes monetary authorities in Hong Kong attempting to provide a sound environment for Islamic banking operations by amending their laws to the specifications of Islamic banking, especially with regards to Islamic Sukuk [bonds], as well as the establishment of Islamic indexes on the Hong Kong stock exchange. More



Sallam Alaykum / Peace be unto you

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