China permits Foreign Banks to Incorporate
Nine foreign banks including HSBC Holdings Plc and Citigroup Inc. won approval from China's banking regulator to start their preparatory work for setting up local corporations in China. China is removing restrictions on overseas banks and permitting them to gain access to the nation’s household savings in line with its commitment to the World Trade Organisation.
Once incorporated, the local units of the banks will be able to apply for retail licenses to compete with Chinese banks in handling the local currency. The lenders are in command of 34 percent of the branches set up by foreign banks in the country, the China Banking Regulatory Commission said in a statement.
Other banks are: Standard Chartered Bank, Bank of East Asia Ltd., Hang Seng Bank Ltd., Mizuho Corporate Bank Ltd., Bank of Tokyo-Mitsubishi UFJ Ltd., DBS Bank Ltd. and ABN Amro Bank NV.
The nine banks will represent 55 percent of total assets held by foreign banks in China.
China's retail market, which has 30 trillion Yuan ($4 trillion) in household savings, is alluring foreign banks. With the augment in incomes the demand for credit cards and other financial services is also rising.
Domestic banks of China are already on track to modernise the facilities to fight their new foreign counterparts.
According to industry analysts, foreign institutions should be able to capture higher-end retail and corporate business in major cities. But they predicted that changes will likely be gradual. China's major commercial banks have huge asset bases and established nationwide branch networks though foreign banks are more experienced.
The 71 foreign banks already represented in China were limited until now to handling foreign currency business. The new foreign bank rules, which took effect from December 11, encourage foreign banks to incorporate locally, lifting geographic and client restrictions on them.
