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Vincent Cheng Talkasia Transcript
LH: Lorraine Hahn BLOCK A LH: Hello and welcome to Talk Asia, I'm Lorraine Hahn. My guest today is the new chairman of the Hong Kong and Shanghai Banking Corportation, Vincent Cheng. The first Chinese to hold the post in the bank's long history. Born in Hong Kong in 1948, Vincent grew up in a working class neighborhood and spent much of his youth promoting social causes. In 1978, he joined what was then known as Hong Kong bank. And in three decades built a career that has seen him move from chief economist to chief financial officer to vice chairman of Hang Seng bank. He has also served the government as a member of the Legislative Council and as a policy advisor. In May this year he was appointed chairman of HSBC. LH: Vincent, congratulations, it is so good to see you. You're the first Chinese as I mentioned to hold this position as Chairman. (VC: Thank you very much) Added pressure to you? VC: Well, a little bit, because it adds an extra dimension, layer. But I've been with HSBC for a long time and I know the people, my colleagues. And we do have a very strong management team. The policies are clearly set. So really, in terms of work, it doesn't add any pressure to me personally. But the fact that, as you mentioned, there is a lot of interest because I am the first Chinese chairman. So.it has a social dimension to it in that sense. I have told myself I can't fail. LH: There are also suggestions, I'm sure you have heard this, that this is part of a localization drive by the bank by putting you where you are? VC: We have always, we are serious about localization of course, but then the policy has always been that you have to put the best people in that job whether it's Chinese, Indian British, American or whatever. That is the rule. But clearly, we do wish to have a strong localization program so that we have more locals at the most senior level. That's quite clear. We also have a diversity program to help the, to have a more diversified management structure. Ladies, disabled, or whatever. But the key is you must put the best people at that job rather than because he's a lady or she's a lady or he's a guy with disability you know. LH: Or he's Chinese. VC: Or he's Chinese. LH: After 97? VC: yeah. LH: Nothing timely? Nothing we can read in between the lines? VC: No I don't think so. Actually if you may say so, because China is of course is an important market. That I, because I am Chinese and have the language ability that I may help a little bit in terms of the China business. But this is an Asia-pacific job. So if nationality is a major consideration, then you have to find somebody who's Chinese, Indian, Malaysian at the same time. So it's not really a consideration. But we are conscious of the fact that we have a very heavy emphasis on corporate social responsibility and therefore diversity is a major initiative we undertake in Asia to make sure that no ethnic group or no particular group of employee are discriminated against or need some kind of positive help in that sense. So there is a little bit of that. But at the end of the day, it is the ability to do the job that matters. LH: Performance. Let's talk about the rise of Asia in the global economy, especially China, now that you've brought that up. China's development - how do you see that altering the world trade balance? VC: Well, I think Chinese exports will continue to rise. And so will India exports in that sense. Asia because of its competitive advantage, and labor costs, and indeed actually, a lot of the Asian countries now have a much better economic structure so that they can produce goods that are wanted in the U.S. in Europe. So I would expect more trade from Asia, if this is inevitable I think. LH: And what about the recent depegging of the renminbi, the Chinese renminbi to a basket of currencies. Is that, how will that benefit China? VC: Well it gives China more flexibility in managing the exchange rates, rather than tying up to one currency. And that will give them some help in the sense of addressing concerns from other countries in the strength of the renminbi, and in that sense, that will create a better relationship between China and the rest of the world. As we all know, there have been considerable pressure from the United States and Europe on the Chinese exchange rate regime. So this would improve the trading relationship, the economic relationship between China and the rest of the world. LH: Will there or must there come a time when the Hong Kong peg must be changed and maybe you know, follow this basket of currency formula? VC: My view is there is no one exchange rate that really is the best. There are always costs and benefits. And at the moment I think the peg exchange rate works well for hong Kong. And because we have number one, the fiscal discipline. We have balanced our fiscal position. And number two, our real economy is quite flexible so there is sufficient adjustment even if we allow the exchange rate to be fixed to the U.S. dollar. LH: What do you think would be the biggest stumbling block, let's say China, as it opens up and becomes a freer market place? VC: Well, there are still a lot of structural imbalances there. Because at the moment, yes, it has been a very successful economic experiment in the last 25 years from a planned economy to a market oriented economy. But still, there are quite a lot of state regulations which may not be compatible if we have more and more foreign investment going into China. And therefore, they would need to change the regulatory regime and government policies, and laws and regulations to accommodate a more flexible, a more market oriented economy. And, this is not easy. This is not easy. If you look at for example, at banking reform. They've gone a long way in terms of allowing foreign banks to invest in the local banks. But the percentage is still quite small. Maximum is twenty percent. And then if you look at the securities companies, there are still regulations on foreign bank participation. So, unless Chinese government can sort of allow more reforms in the economy, there would be kind of bottlenecks and unhappy foreign investors in that sense. LH: With the economic development of the course of another very populous country, India for example, what would that impact be for the region? VC: Well, a lot of foreign interest have been expressed in the Indian economy. As far as we are concerned for example, we are quite keen to expand our operations there. In terms of the economy, number one, if looking for HSBC's point of view as a real example, India actually provides us a very good base to outsource some of the work, but not just call centers. In terms of more sophisticated operations like IT, so we have more sophisticated operations there now. So it would actually help, I think, large multinationals, like HSBC, to adjust, to increase efficiencies. So in that sense, India is not just helping itself but it's also helping to provide a space for multinationals to improve the efficiencies. And then that would have an impact on world economy and hopefully the world will go faster because we are more efficient. LH: Vincent, we are going to take a very short break. Don't go away when we come back we'll ask Vincent about how technology is changing the face of consumer banking and is the art of banking is becoming too impersonal? Stay with us. BLOCK B LH: Welcome back. My guest is the chairman of HSBC, Vincent Cheng. Vincent, let's talk a little more about China and the Hong Kong Bank, HSBC's China strategy. What is it? VC: Well, our China strategy is actually quite simple. We want to grow as fast as regulations will allow. We believe in Chinese economy, we have been there 140 years, when we've seen the changes and the changes in the last 25 years has been really dramatic and we believe that this is a very important market for us, and therefore we would like to be there as much as we can. LH: But do you think realistically that HSBC can make big inroads in China, considering you also have very large Mainland Chinese institutions already prevalent in the country? VC: I think we can make a difference there. Number one, we provide different type of banking services; we have a large international network which our friendly banks I would say do not have. So we do have a unique position that which will HSBC to be a major player in China. We also see that we can help Chinese companies to really expand their business overseas or in China, and we also think that we have a much larger product range than some of our counterparts can provide. LH: Aside from China and India, HSBC is in the Middle East. I understand Iraq is another possible option, or maybe in there Mexico. Where are the other Brazil, where are the other hot spots for growth, outside of the countries you're already in? VC: Well, we're already in 77 countries, and my road is Asia Pacific really, and in Asia Pacific at the moment, we are focusing on the countries where we have operations but I think we are under-represented in some countries like Vietnam, like Japan, South Korea, I think our market share there is actually not commensurate proposition, financial position in the world ranking. So we are trying to expand our businesses in all these Asian countries. If there are opportunities in some other countries, we certainly look at those, but at the moment my focus in Asia is really on countries where we already have operations. LH: As I mentioned earlier, banking these days, in my time, and your time, we used to go to the bank teller, we used to line up and get our books done, and chopped and statements, etc. Now it is internet, it is by telephone. Is this a good thing? Are we making progress here? VC: Well, it depends on how you look at it. These are additional channels for customers to use. If they prefer to come to bank branches, of' course, we work on them. (LH: Yeah, but the line-ups are long. It's not as efficient) Well, the key is that there are machines there also which people can use, like the passbook machines, ATMs, they could use at the same time, if they want to do other banking services, they can talk to our colleagues. So, we are going for multi-channel rather than a single channel strategy as you know. LH: But are big banks, and HSBC is not the only one here, there are other banks who do this as well. Are big banks losing touch with the smaller customer? VC: I should hope not, I'll give an example. If there is a customer complaint to me personally, I handle it personally. Unfortunately it's only complaint, but when I meet my friends, some of them are not really big customer of Hong Kong Bank; I also serve them kind of personally. Are we losing touch? We try not to, we try not to. LH: Vincent, we're going to take another very, very short break. When we come back, we'll talk to Vincent about his humble beginnings, and his first job, helping his father at the family fruit stand. Stay with us. BLOCK C LH: Welcome back, you're watching Talk Asia and my guest is Vincent Cheng, the man at the helm of HSBC Asia Pacific. Vincent, you came from very humble beginnings. I read you played on the streets, and you helped your father sell fruits. Is this, one, is this true and two, is this where you developed some street wise business acumen? VC: Well, first that's true because Hong Kong in the 1950's, the early 1950's was actually quite a poor place. Quite a few people actually had to sleep on the streets, partly because in the summer, it's much better to sleep the streets. (LH: Cooler) So yes, but my experience is not kind of unique. Those days it's just common, you know. Kids are kids, they're all the same. LH: And working, that was your first job, right? At the fruit stand? VC: Well actually, I had quite a lot of job when I was a kid. Not compulsory I would say, well compulsory by economic conditions but not compulsive by any sort of employer or whatever. It was quite common for kids to go out and look for jobs after school. We did a lot of things; I helped my father to sell fruit. Actually, I didn't really help, just hold the basket and let customers put the oranges and apples in the basket and then wrap it and hand it to the customers and receive cash. (LH: And how old were you when handling cash?) Oh I don't know, maybe five or six. I still remember, very young. And then I did my homework just on the kind of a carton box for food. That's quite common in Hong Kong those days. LH: Social issues, was also very important to you when you were younger. (VC: Yeah, when I was a university student) You were arrested or detained? Which one was it? (VC: Detained) For protesting? VC: For protesting. At that time, I still remember I was actually working as a volunteer because Hong Kong at that time was full of squatters. So some squatters residents wanted to make a petition and that's basically it. (LH: And you got in trouble) Yeah, because at that time that was right after 1967 and there were some very tough rules which have been real sins, and today handing a petition is nothing, but those days it was serious business. So, we kind of got reprimanded. LH: That is amazing, you know if I chart your course from the beginnings, your humble beginnings and then what happened to you here in terms of your detention and working your way to university, and working your way up the business ladder to where you are now. That is really something. VC: In Hong Kong, there are many many examples like myself. (LH: You are too humble). No, no. You look around, a lot of Hong Kong people have really humble beginnings which is part of growing up in this beautiful place I would say. We work hard, we try very hard, we do an honest day's work for honest day's wage, that's the character of this city. LH: you went to a primary school; I understand anyway, that wasn't necessarily for the best of academics. (VC: No, not at all. One of those schools I think it's no longer existing.) Did that make you even want to try harder to study? VC: Yes, but I wasn't a good student. I wasn't proud of it but I'm looking back. Actually, we made a mistake or my parents made a mistake of putting me through formal schooling too early, so I was always one year younger. And you know, when you are young, one year makes a lot of difference in terms of ability, so I never got any really good grades in school, and so after secondary I couldn't get into university. And then I worked and studied at night and then get into university. Education is the only thing that can change a person's future, really in my view. Education, either formal or informal in the sense that you work really hard and try out something else, that's really important. There is no substitute really for hard work. LH: As a child, you also suffered from polio. VC: Yeah I got polio when I was six months old, I was told. And that broke my family, I mean, later on I was told, my parents never told me, but I was told by relatives that my mum actually sold everything just to try to get a doctor to treat my polio, but at that time polio cannot be treated, so I still remember I went through all this. I went to the temple, and drink some water with ginseng and all sorts of things, but I never blame my parent for taking me through, because their hearts, they, but they did not know the right way to treat me, so I had untreated polio for a long time. LH: Did that affect the way you grew up at all or? VC: Oh yeah, of course. I could not participate in sports, but I still tried. I played table tennis; I did sports which I could do. I could not run a 100 meter, but you know, I went off fishing with my friend and I did all the naughty things like a kid. (LH: So it never really stopped you from leading a regular life.) I tried not to let it worry, but then of' course those days when you have a disability people laugh at you which is again common. Your classmates gave you nicknames which you didn't want, cripple boy whatever. It did hurt when you were young, it did hurt, but that's life. You just got to grin and bear it. LH: Yes. With all the work and travel schedule now. Where and how and when do you have time to have some fun? VC: Well, I travel with my wife. (LH: All the time?) Most of the time, most of my trip I try to spare her the agony, like fly to New York for one night, but otherwise we try to spend our time together. And weekends I spend time with my family, we try to, at least I'm home doing and then they are home. So yes, that's how I find time to enjoy life. I have very simple hobbies. (LH: Like?) Swimming, reading a book, talk to the kids, very simple stuff. LH: It's been now a few months since you've taken over this new position at HSBC. I presume the honeymoon is over. What will be your focus now? VC: There is no honeymoon in HSBC. The moment the day you enter the office then you start working, you're not given a great spirit. It's a continuation of my different roles in HSBC. The biggest challenge of' course will be to take the group's business forward in Asia. Asia is not one single market. Different culture, different regulations, different rules. So, the biggest challenge would be to work together with my team, to ensure that no. 1 you serve the customers' well, no.2 to expand our business, find more business opportunities, organic role will be something that we're very keen on. LH: Well we wish you all the best. That's a lot of work ahead. Thank you very much. Thank you. And that has been Talk Asia this week. My guest has been the chairman of HSBC Vincent Cheng. I'm Lorraine Hahn. Let's talk again next week. 
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