Citigroup, the world's largest financial conglomerate, received its first Chinese customer in Shanghai on Thursday, making it the first wholly foreign-owned bank to gain direct access to domestic clients.

It is the only fully overseas-funded financial institution to get the green-light from China's central bank to provide foreign currency services to Chinese customers

The licence given to Citibank is for foreign currency dealings with Chinese customers, a service promised to international financial institutions under China's bid to enter the World Trade Organization (WTO).

"This is a momentous step in the liberalization of the Chinese banking and financial market," said Sanford Weill, chairman and CEO of Citigroup, at the opening ceremony of the bank's new branch at the Bund, Shanghai's financial heart.

Prior to the move, the Xiamen International Bank - a Sino-foreign joint banking company - became the first foreign invested bank to get approval to take Chinese clients when it was licensed earlier this month to conduct foreign currency business with domestic clients.

Earlier rumours said the group is in discussion with the Shanghai-based Bank of Communications and Pudong Development Bank - China's largest listed bank - for a stake takeover, but the company did not make any comment on Thursday.

In December, Hongkong and Shanghai Banking Corp (HSBC) bought 8 per cent stake in the Bank of Shanghai, becoming the first overseas bank to take a stake in a mainland bank.

Foreign banks were previously restricted to dealing with non-Chinese citizens and overseas-funded companies. However, they are still not allowed to offer services in renminbi to domestic customers.

Overseas giants like Citibank have been anxiously waiting for the gradual opening of China's sheltered financial sector, hoping to tap US$82 billion of personal foreign currency savings and, eventually, US$1.5 trillion-equivalent in yuan savings.

Analysts said a key step of opening will be when permission is granted to foreign banks to conduct yuan-denominated business with Chinese companies two years after the country's WTO entry last December and with Chinese individuals five years later.

As part of its commitment to the WTO, China pledged to allow overseas banks to conduct foreign currency transaction services to local Chinese individuals and corporate customers.

General Manager of Citibank Shanghai Branch Huang Xiaoguang said the bank will focus on a customer-base with higher income.

Receiving more than 100 inquiry phone calls from local residents on Wednesday following the news the bank would serve Chinese customers, Linda Wong - head of Citibank China's consumer bank business - sees a rosy prospect for the new business.

"We hope to move on to cities like Beijing, Guangzhou and Shenzhen," she said.

Earlier last week, Dai Xianglong, governor of China's central People's Bank of China (PBOC), said there is no legal hurdles for foreign banks to apply for licences to develop foreign currency business in China.

According to PBOC's Shanghai office, besides Citibank, more than 10 overseas financial institutions have submitted applications to the central bank for providing Chinese customers with forex services. They include HSBC and the Hong Kong-based Bank of East Asia. Other overseas banks, such as Standard Chartered Bank, Credit Agricole Indosuez, Oversea-Chinese Banking Corp and Heng Seng Bank, are also preparing to do new business.

HSBC filed documents in February for the go-ahead for similar business lines in four Chinese cities, namely Beijing, Shanghai, Guangzhou and Shenzhen.

"What we are doing now is making some preparations for the opening of these operations, such as staff trainings," said Dandan Chang, spokeswomen for the bank.

"I believe we can get the approval in the very near future," said Zhang.