(Bloomberg) -- A surge in Chinese companies expanding into the Middle East has spurred Deutsche Bank AG to adjust its regional structure and bring the Mideast corporate banking operations closer to Asia.

Over the past 12 months, Deutsche Bank’s revenue from helping Chinese firms invest and expand in the Middle East has doubled and it’s expected to grow at a similar pace over the next couple of years, according to Ole Matthiessen, head of corporate banking for Asia Pacific, who took over the Middle East and Africa regions at the end of 2023. Those businesses were previously grouped with Europe.

Making the Asia Pacific and the Middle East a joint region “on various levels” helps build more connectivity, Matthiessen said in an interview. “We’ve changed our structure to make sure that those corridors, where we see emerging activities and strong growth, are smoothly managed and resources are put where we need them the most.” 

Deutsche joins rivals including HSBC Holdings Plc and Standard Chartered Plc in looking to tap increasing flows between China and the oil rich Gulf states. From government-led funds to property and electric-vehicle companies, trade and investment ties between the two regions have deepened amid US-China tensions. Sovereign wealth funds including Mubadala Investment Co. are also looking to increase their exposure in China and other parts of Asia. 

“The political alliance between the Middle East and China has an effect,” said Matthiessen. “There’s a lot of capital investment from the Middle East going into China and Asia Pacific overall.”

In total, revenue that Deutsche booked within China and from local industry leaders’ global expansion has grown “double-digit” in the past 12 months, he said, without providing comparisons.

Localized Financing 

At the same time, demand has risen “exponentially” from multinational firms in China to seek advice on managing geopolitical risks and localizing financing, Matthiessen said. That has prompted an increase in so-called panda bond issuance, or yuan-denominated notes issued by foreign entities in the China market, and moves toward securing local supply chains such as auto-part manufacturing. 

On the jump of panda bonds, “I would argue it’s less about the interest rate differentials and lower financing costs but more that companies are looking to ring-fence their China business, and keep financing for China local.” 

Deutsche also expects deal and money flows to rise from Chinese and global customers into the Southeast Asia region. In Indonesia, for example, about 50% of the corporate bank’s growth in business stems from Chinese companies linked to the “new economy” sectors, such as online travel agencies and payment service providers, according to Matthiessen. 

--With assistance from Kevin Dharmawan.

©2024 Bloomberg L.P.