Sun, Dec 26, 2004 - Page 11 News List

Foreign lenders get access to Beijing

YUAN BUSINESS HSBC and Standard Chartered will have limited lending abilities and will only be allowed to take deposits from foreigners and small loans from Chinese banks


HSBC Holdings Plc and Standard Chartered Plc received licenses to conduct local currency business with Chinese companies in Beijing, the first overseas lenders to gain greater access to the nation's capital.

The Beijing branches of HSBC, Europe's largest bank by market value, and Standard Chartered, which derives two-thirds of its profit in Asia, won approval from the China Banking Regulatory Commission, the lenders said in separate statements.

China on Dec. 1 increased the number of cities where overseas banks can do yuan business from 13 to 18, including Beijing, where 4,551 companies are registered, according to government data. Their ability to lend is constrained because they can only take deposits from foreigners and borrow a limited amount of money from Chinese banks to fund loans.

"The market is opening up for the foreign banks, but only gradually," said Simon Ho, a Hong Kong-based banking analyst at ABN Amro Asia Ltd.

Foreign banks will be quite slow to expand the local corporate business because the risks are higher and the cost of funds is greater, he said.

In two years, China will allow HSBC, Citigroup Inc and other banks to conduct business with its 1.3 billion individuals, who had savings of USUS$1.5 trillion as of Nov. 30.

London-based HSBC said it will also be allowed to open a sub-branch in Beijing in the first half of next year, to be located in the city's Chaoyang district.

Nine overseas banks applied to conduct yuan business in Beijing, a spokesman for the China Banking Regulatory Commission said, without elaborating. The commission will grant more licenses "soon," he said, asking not to be named.

HSBC, founded in Hong Kong and China in 1865 to finance British trade in goods such as silk and tea in Asia, owns stakes in the nation's Bank of Communications and Bank of Shanghai.

The bank's profit in China more than doubled to 324.7 million yuan (US$39 million) last year from 156.1 million yuan in 2002. Hongkong & Shanghai Banking Corp, the Asian arm of HSBC, reported profit of US$3.3 billion for last year.

The license "will allow us to significantly strengthen our presence in China's capital city," said Dicky Yip, chief executive of China business at HSBC, in the statement last on Friday night.

"Beijing's yuan market offers an area of potential growth for us." HSBC's loans in China gained 52 percent to 21.3 billion yuan last year, while total assets climbed 69 percent to 32.2 billion yuan, the bank said in April. Outstanding local currency loans in China amounted to 16.9 trillion yuan at the end of July, according to central bank data.

Standard Chartered, which agreed to buy a fifth of Bohai Bank, a new Chinese lender, also applied for yuan licenses in the cities of Xiamen and Tianjin, Martin Fish, chief executive of its China business, said on Dec. 1. The bank has eight branches in China.

China also gave overseas banks the same business opportunity in Kunming, Xian and Shenyang as part of its obligations to the World Trade Organization.

HSBC also said it won approval to upgrade its representative office in Chongqing, southwest China, to a full branch, bringing its total network to 11 outlets.

Beijing, with a population of 13.8 million, had 4,551 state-owned and other companies operating in the city, according to the National Statistics Bureau's Web site.

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