Barclays Plc, Britain's No 3 bank, plans to expand its investment-banking unit in China rather than acquire stakes in local banks to win business in the world's fastest-growing major economy.

Barclays expects its investment-banking business in China to expand at an annual pace of 15 to 20 per cent, President Robert Diamond said in an interview in Shanghai, where its unit Barclays Capital opened the first branch in the country.

"Rather than a kind of big bang where we make a significant investment in someone else's business, we have an option here to continue investing in the Barclays Capital business," Diamond said.

Barclays is adopting a route different to that of rivals such as HSBC Holdings Plc, Royal Bank of Scotland Group Plc and Bank of America Corp, which are buying stakes in Chinese banks to gain business in an economy growing at twice the pace of the US.

European and US banks have spent US$8 billion buying stakes in China's lenders. They are also opening more branches in the nation of 1.3 billion people after China agreed to lift restrictions on overseas banks at the end of 2006, allowing them to compete for US$1.69 trillion of local-currency household savings.

"We have clearly looked as others have, and certainly have had the opportunities that others have, and at this point decided that this is not the way to grow our business here," Diamond said about prospective acquisitions. He declined to give any figures for investments in China, saying it's a "pretty significant" investment.

Barclays in September 2004 won approval to invest as much as US$75 million under China's so-called qualified foreign institutional investor program.

The company has applied to China's foreign-exchange regulator to raise the limit for investment in yuan-denominated shares and bonds, Diamond said.

Diamond said the Shanghai branch is waiting for a license to offer interest-rate products. Barclays Capital will apply for approval to trade derivative products and yuan products within two years, he said.

The British bank is expanding in China and elsewhere in Asia as Chief Executive John Varley tries to make good on a pledge to more than double the share of earnings outside the UK, where consumer banking is slowing, from about 25 per cent last year.

Barclays has offices in 15 countries and regions in the Asia Pacific.

Barclays plans to tap Chinese companies for business as the government prods them to become more competitive and expand overseas, Diamond said.

One example is Lenovo Group Ltd, which this year bought International Business Machines Corp's personal computer unit for US$1.25 billion, aiming to become the leading PC-maker within the next five years.

"As corporates in China become more competitive and sophisticated, they fit perfectly and exactly into what we want to do," Diamond said.

"It's the sweet spot of our business model of risk management and financing."

(China Daily November 5, 2005)