Turkey’s banking regulation and supervision authority has granted permission to Bank of China (BoC) to launch operations in the Turkish market. Bank of China becomes the second Chinese lender to enter Turkey, after Industrial and Commercial Bank of China (ICBC), which had purchased a majority stake at a local bank last year. The Turkish subsidiary of Bank of China is expected to commence business in nine months, and according to the banking authority’s statement published in Turkey’s Official Gazette on May 5, 99.9% of the subsidiary will be owned by the Bank of China, the remaining 0.1% by four companies belonging to another subsidiary of Bank of China, and the initial capital will be $300 million. Bank of China’s entry into the Turkish market is a welcome development for both the Chinese and the Turks. The bank has been interested in Turkey for a long time. It had made its first application for a Turkish banking license in early 2010, which was rejected by the authorities due to incompliance with capital requirements. One year later, the bank opened a representative office in Istanbul, and after five years of being active in Turkey in this limited capacity, Bank of China is now going to launch its full range of banking services. For the Chinese, it is important to have a foothold in Turkey’s financial market, because Turkey has the eighteenth largest economy in the world and a robust private sector that has the ability to keep on moving forward despite political and economic instabilities. Besides, the expected progress with the “One Belt, On Road” (OBOR) initiative and Turkey’s key location on the project’s route as a connector between Asia and Europe are expected to open up lucrative business prospects for China in the near future. For the Turks, the arrival of Bank of China is an even more welcome development, as the Chinese are coming at a time when other international investors are rather hesitant in bringing in their money. Turkey’s economy is actually not a weak performer; after 3% GDP growth in 2014, it has scored 4% in 2015. The problem is, however, that risks are increasing. Geopolitical concerns arising out of the escalating conflict in Syria in Iraq, and the spillover effects of these conflicts inside Turkey in the shape of terrorist attacks and rockets fired from across the border falling inside Turkish territory are major factors keeping foreign investors at bay. In the meantime, Prime Minister Ahmet Davuto?lu’s recently announced decision to step away marks the likely beginning of a period of power struggles and political uncertainty in the country, which does not make Turkey an attractive destination for investment either. Under the current conditions of weakening international investor confidence and increasing geopolitical risks, a new large-scale investment from a major Chinese bank breathes new energy into Turkey’s economy. When Turkey’s Deputy Prime Minister Mehmet ?im?ek made the public announcement on Bank of China’s entry into the Turkish market, he said that the new bank will “contribute to efforts for attracting Chinese investment to Turkey and increase financing opportunities for the private sector.” The latter part of the statement refers to a realistic expectation. With increasing risks, a high loan-to-deposit ratio and rising share of non-performing loans, Turkish banks are increasingly reluctant to extend new credit to their clients. Under these circumstances, as Bank of China will make efforts to establish itself in the Turkish market, the new financing opportunities it will provide will be well received by Turkey’s companies that are in need for funding. One has to be more critical with regard to the first part of ?im?ek’s statement, at least for the time being. Can the Bank of China (together with ICBC) help to draw more Chinese investment to Turkey? In theory, this is certainly possible. Agreements signed between Turkey and China last November imply the construction of railroads spanning the entire width of Turkey and going beyond to link the country with Central Asia with Chinese finance, and the Chinese banks in Turkey are likely to play a role here if and when the project is realized. However, other than these future projects, Turkey still cannot be considered a destination for Chinese investment. According to data released by Turkish Ministry of Economy, there were 46,756 companies with foreign capital registered in Turkey as of January 1, 2016, out of which only 739 were Chinese owned. 338 of these companies are doing wholesale trade, 103 retail trade, and 35 are restaurants. Courtesy – Asia Times Online