Challenges of Chinese banking: the complexity of Chinese loyalty

Image credit: Iain Brew.

About the authors: Dr Chris Baumann is a senior lecturer in business at Macquarie University in Sydney and a visiting professor at Seoul National University. His research is on customer loyalty, competitiveness and East Asia (China and Korea). Dr Hamin is a lecturer in business at Macquarie University. Dr Rosalie L Tung is a chaired professor of international business at Simon Fraser University in Vancouver.


Chinese consumers are an important target market for banks, both in China itself and also overseas. A recent academic study tested for levels of business assigned to banks by Chinese bank customers. The investigation of Chinese banking behaviour found that ethnic Chinese have overall adapted their customer loyalty to local environments in Australia and Canada.

However, overseas Chinese’s savings held with their main bank are substantially higher than for local Caucasians. Based on the study’s survey of 645 Caucasians and Chinese in Australia, Canada and China, overseas Chinese on average assign 88% of their assets to their main bank compared to Caucasians who only allocate roughly 73% to their main bank. In contrast, the Chinese in China invest 70% of their savings with their main bank.

High loyalty levels of the ethnic Chinese for savings products require retention strategies by banks to sustain customer satisfaction with resulting customer loyalty of the ethnic Chinese. Marketing campaigns should offer products and services customised for the ethnic Chinese given that this lucrative segment is increasingly targeted by both local Western banks but also financial institutions from Asia and China itself.

The joint Australian/Canadian study also investigated borrowing behaviour and found that the Chinese have much lower loyalty levels than the Caucasians. When financial need arises, the Chinese draw on their own savings: with savings between 30-40% of their annual income, the Chinese have one of the highest savings rates in the world.

The ethnic Chinese are an attractive segment with enormous potential for growth, but their low loyalty levels for borrowing products require more aggressive marketing campaigns. Overseas Chinese are entrepreneurial and engage in real estate investments, making them profitable segments for new and increased loans and lines of credit. The challenge for banks is that this segment is highly competitive and shops around for the best deal, putting pressure on Western and Asian banks alike.

Western banks need to better understand Chinese consumers where the lowest loyalty levels were found in China itself. The Chinese in China only borrow 19% from their bank since Western and local banks are in direct competition to microfinance pools hui (the Chinese term for ‘club’). Huis are the cornerstone of China’s relationship-based informal Rotating Credit Associations where family and friends self-manage their finances. Therefore, banking products and services in China need to be positioned and promoted more competitively in order to deviate borrowing business from family and friends to the formal banking industry.

Details of the two studies referred to can be found here and here.

Read next: Dr Baumann’s previous article for Marketing magazine ‘Connecting with the new Chinese consumer’.