Beyond geoeconomics: Chinese state-owned bank expansion into Europe

China’s global economic expansion has been widely discussed, especially through the analysis of the Belt and Road Initiative (BRI), a geopolitically and geoeconomically thorny issue often embedded in the powerful, yet contested narrative of debt-trap diplomacy. Scholars, for example, investigated China’s foreign economic development through Chinese aid and foreign direct investments, as well as the effects of huge infrastructural projects and potential domestic costs for BRI countries. However, the financial actors involved and the way such investments are performed have received little attention. Building on results from both desk research and 14 expert interviews with representatives from the industry and policymaking, we seek to address this gap by analyzing the agency and organization of Chinese state-owned commercial banks (SOCBs). SOCBs have established an extensive network of branches and subsidiaries throughout Europe. One would consider this as something trivial since Western banks’ global networks also rely on subsidiaries and branches. Yet, we have identified a number of differences, of which we discuss two in detail: First, the distinct expansion of SOCBs’ networks with their specific branch-cum-subsidiary strategies that are different regarding the number of entities and the legal setup to that of Western banks; and second, the role of the state as a distinct driver of China’s financial expansion. Chinese bank branches and subsidiaries play a pivotal role in the financial implementation of the BRI. In Europe, some financial centers have been more attractive for Chinese banks than others have. For example, Luxembourg’s international financial center, with its specialized investment fund industry and expertise in designing special purpose vehicles (SPVs), ranks among Europe’s most prominent strategic financial entry points into European markets, in which Chinese banks have located their European headquarters. This location with its specific legal framework and other strategic endowment factors plays an important role for the decision of foreign banks to localize in this IFC rather than in others. Our empirical results suggest that Chinese banks have supported Chinese state-owned corporations to take over strategic firms and technology acquisitions via SPVs in the past, and they establish investment funds for investments in infrastructure projects, thus operating within the broader guidelines of China’s state reform and development strategies. Drawing on our empirical results, we suggest that Chinese banks, embedded in the broader logic of China’s financial opening and expansion policies, respond to two different – partly conflicting – logics: the Chinese state and the global market. This disputes current conceptual frameworks mainly developed on Western liberal market economies and puts the analytical spotlight on the agency of banks as (one group of) important geoeconomic boundary spanners.