Eight foreign banks have applied to open retail operations in China, the bank regulator said as a WTO deadline for opening China's banking market passed yesterday.
Some 71 foreign banks are represented in China, but until now they were barred from handling business in Chinese currency for retail customers.
Beijing has agreed to open the market as part of its WTO membership, and its banks have been racing to modernize in preparation for facing foreign competitors.
Banks that have applied for local status are Citigroup Inc of the US, Japan's Mizuho Corporate Bank, Britain's HSBC Corp and Standard Chartered PLC, Dutch bank ABN Amro Holdings NV, Singapore's DBS Bank and Hong Kong's Bank of East Asia and Hang Seng Bank, according to Web site of the China Banking Regulatory Commission.
HSBC, Citigroup and others including Bank of America Corp have spent billions of dollars to prepare for the market opening, buying stakes in Chinese partners and setting up credit card and other ventures.
Foreign competitors want a share of a market with some US$4 trillion in household savings and growing demand for financial services.
But foreign banks still must meet Chinese regulatory requirements to conduct retail business.
That, along with the cost of operating a branch network, is expected to discourage many from setting up local operations. Most are expected to continue to operate through ventures with Chinese partners.
"Chinese banks will face more competition but they have been here for such a long time and are familiar with the clients and their culture and habits," said Wu Yonggan, a Shanghai-based banking analyst with Guotai Junan Securities (國泰君安證券).
"The opening up of the Chinese market is an opportunity for foreign banks but I think they still need at least another two years to pose substantial competition threat to Chinese banks," Wu said.
Zhang Jianguo (張建國), the president of China Construction Bank (中國建設銀行), China's third-largest bank, said that he was not too worried, despite the foreign lenders' reputation and experience.
"Many Chinese banks, including our bank, are strong in terms of the following three aspects -- broad network, abundant fund resources and many excellent clients," he told a gathering in Beijing.
The new rules place different requirements on foreign banks, depending on whether or not they choose to incorporate here.
Banks that incorporate in China can, in theory, do business in the local currency with the majority of the nation's billion-plus potential market of retail customers. By contrast, banks that fail to incorporate locally cannot take deposits of less than 1 million yuan (US$125,000), restricting them to China's growing but still relatively small club of millionaires.
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