China is gearing up to open its financial services market in line with its WTO commitments, but analysts say the new rules are likely to fetter foreign banks' full participation in the sector.
Beijing gave the green light last week to long-awaited draft regulations on foreign lenders operating in the country, a move meant to fulfill China's promises made to the WTO when it joined in December 2001.
China's State Council or Cabinet has yet to provide specifics, but previous drafts circulated in the Chinese press point to a host of stiff conditions that are unlikely to make the sector an even playing field.
"China wants to control the opening of its banking system," said Yan Mei, a senior banking analyst at Moody's Investor Service in Hong Kong.
"Foreign banks will want to have fewer constraints, but the restrictions will be there," she said.
The earlier regulatory proposals showed that foreign banks setting up locally registered businesses would have to sink at least 1 billion yuan (US$125,000) in capital.
Banks would need additional capital of 100 million yuan for each branch, while overall lending must be kept below 75 percent of total deposits.
A statement released by the government last Thursday said that the purpose of the laws was to open the market, strengthen supervision of foreign banks and encourage the development of local banks.
Wu Yonggang, a banking analyst with Guotai Junan Securities based in Shanghai, said he expected the Cabinet had made few amendments to the regulations expected to be published ahead of Dec. 11, the fifth anniversary of China's entry into WTO.
"I don't see much change in the new draft," he said.
Foreign banks can now lend and take deposits in foreign currency and provide yuan-denominated services only to corporations in China.
On accession to the WTO, China committed itself to deregulate its banking sector to the extent that, in principle, foreign lenders can do yuan business with any client anywhere in China.
But digging beneath the surface shows that Beijing is imposing the kind of curbs Chinese banks face in breaking into overseas markets such as the US, said the former head of a Chinese bank who insisted on anonymity.
"A tit-for-tat aspect is one thing that's driving this. Out of all the Chinese banks, only Bank of China has been able to open a branch in the US," he said.
"There is bit of muscle flexing with China saying `you want to be in my market, let's talk about your market,'" he said.
Although the rules could pose problems for foreign lenders, Charlene Chu, a director at Fitch Ratings in Beijing, agreed the restrictions were not coming out of left field.
"They do impose restrictions like that in other economies around the world. The Chinese are not coming out of nowhere with these regulations," she said.
The most prohibitive stipulation in previous drafts was the minimum deposit requirement banks could take from a single customer -- set at 1 million yuan.
Such a high threshold would severely limit the ability of overseas lenders to obtain local currency deposits, forcing them to focus on the niche market of high net-worth individuals.
"That would potentially have a big impact for banks, obviously because it's cutting them out from a very large segment of the market," Chu said.
But given that the WTO regulations on foreign banks operating in China are vaguely worded, Beijing was nevertheless likely to fulfill its agreement with the global trade club.
"At the end of the day China can argue they are giving foreign banks national treatment," Chu said.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique