Citigroup, HSBC and other foreign banks marked their local incorporation in China yesterday, a rite of passage after years of biding their time on the sidelines of one of the world's fastest growing financial markets.
Citigroup Inc and Britain's HSBC Holdings PLC were among four foreign banks approved to incorporate local subsidiaries, a step toward entering the local retail banking market. Until recently, most banks could handle only limited local currency business and international banking.
"We want to be the leading customer-focused international bank in China," said Richard Stanley, chairman of Citibank (China) Co, Citi's new wholly-owned local unit, during a ceremony featuring lion dancers, cymbals and confetti at the bank's regional headquarters in Shanghai's Pudong financial district.
HSBC and Hong Kong's Bank of East Asia Ltd (
"Today we opened a new chapter in the bank's 142-year history in China," HSBC Bank (China) Co Chairman Vincent Cheng said.
All the banks, dwarfed in the local market by state-controlled rivals, have said they intend to focus on relatively wealthy Chinese customers and corporate clients.
"We're a tiny fraction of what the local banks are and will be for the foreseeable future," Stanley said.
Still, the banks are looking at a range of new products as they gear up to compete for local customers.
New York-based Citibank would like to start underwriting local currency bonds, once regulations allow, Stanley said.
Cheng said that HSBC plans to enter all areas of the business, serving retail, multinational and local corporate clients, especially those looking to invest or expand operations overseas.
Beijing agreed to gradually open the industry to foreign competitors under the terms of its entry into the WTO membership in 2001. Chinese law requires foreign banks to set up Chinese subsidiaries to handle local currency business.
The banks have already spent years gaining a foothold in China's banking market. Several have bought stakes in Chinese banks and are helping them to market credit cards and other services.
The biggest are setting up Chinese subsidiaries with plans to target the retail market, but many others may operate through partnerships with local banks.
Eight other banks are in the process of incorporating local entities, according to the Chinese banking regulator. They include US bank JPMorgan Chase & Co, ABN Amro, Hong Kong's Hang Seng Bank Ltd (
Germany's Deutsche Bank AG and France's BNP Paribas SA said they plan to apply for permission to incorporate.
HSBC has 32 outlets in 14 cities across the country.
Citigroup executives say the lender plans to expand its network in China from 16 offices to 30 and will target markets for investment and corporate banking and wealth management.
New ATMs have been popping up all over Shanghai in readiness for an expansion of local business.
Citigroup also owns minority stakes in two Chinese banks, and the Citigroup executives said that the company is helping them to expand credit card and other services.
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