Foreign banks will need niche to prosper in FTZ

Liberalization policies are creating opportunities for overseas financial institutions and their clients, reports Wu Yiyao from Shanghai

Since the China (Shanghai) Pilot Free Trade Zone was launched in September, there's been an increasing number of bank opening ceremonies, and executives of foreign banks said that as more detailed guidelines are released, business has been picking up.

Since March 1, there's been no interest rate ceiling on foreign currency deposits of up to $500,000, whether held by companies or individuals.

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And according to the People's Bank of China, companies based in the zone may borrow offshore yuan.

There's certainly plenty of competition, bankers said, but with the vast demand in the zone, lenders should be able to find a market niche.

"I think there's ample market demand in the zone, and each player may have its own strengths. Competition is good for clients, and we are looking for a win-win-win situation for lenders, clients and the market," said Andrew Au, chief executive officer of Citi China and chairman of Citibank (China) Co Ltd.

Unlike branches of Chinese lenders in the FTZ, foreign banks' facilities are less crowded. Indeed, some are essentially deserted.

"It's not that we have less business than Chinese lenders; it's simply because foreign banks may attach more importance to corporate finance, a business that clients can do over the Internet. There is less on-site, face-to-face contact," said an employee at a foreign bank outlet in the FTZ.

Foreign banks are probably eyeing the expanding trade that will be conducted through the FTZ. Those transactions will increase demand for cross-border financing, said Jimmy Leung, a banking specialist at PricewaterhouseCoopers.

Access to global networks will help foreign banks leverage their FTZ presence to forge links between the zone and foreign markets, helping clients capture new growth opportunities, bankers said.

The FTZ is a milestone in China's efforts to build an international financial center in Shanghai and reform the economy for longer-term viability, said Neil Ge, DBS Bank (China) Ltd's chief executive officer.

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